HSBC (HBC) to Become First Non Chinese Company Listed in Shanghai

By: Trader_Mark

In early fall we had mentioned China potentially listing its first "outside of the country" company [Sep 11, 2009: China Opens Door to Foreign Listings] as the country takes baby steps in becoming a full fledged international monetary exchange of every sort (this will take many years).  Banking giant HSBC (HBC) noted it would want to be all over this...

Some multinational companies have also signalled that they would be interested in issuing shares in mainland China. “We will definitely want to do it,” Stephen Green, HSBC’s chairman, said at the bank’s first-half results conference in Hong Kong last month. “That is the strategic statement that we’d like to make.”

And so it has come to pass... via CBSMarketwatch:

• HSBC Holdings PLC's long-awaited Shanghai stock listing will seek to raise $8 billion, a report said Sunday, well above previous forecasts for the banking giant's mainland Chinese debut.
• The British newspaper Observer reported that HSBC's Shanghai initial public offering will total 5 billion pounds ($8.1 billion). Previous reports had expected the IPO, which has yet to receive approval from Chinese officials, to be worth $5 billion.
• The report also said HSBC will become "the first international company" to list on the Shanghai exchange, beating other companies in the race for a Shanghai share presence. Lawyers in London say that the China Securities Regulatory Commission is expected to change its laws in January to allow foreign and non-mainland companies to list in Shanghai, the Observer report said.
• HSBC is already well capitalized and doesn't need the money from the IPO, but rather, it is keen to raise its profile with Chinese retail investors as it expands its branch network and looks at buying stakes in rival Chinese banks, the report said.

• The listing underlines the importance of China to HSBC's growth as well as demonstrating how the centre of financial gravity is moving east. It has appointed two Chinese banks – China Citic and China International Capital Corporation – to advise it on the flotation and is set to add Goldman Sachs as the float date approaches, possibly as early as March.
• HSBC recently signalled its determination to expand in China and across Asia by moving Michael Geoghegan, its chief executive, from London to be based full-time in Hong Kong, where HSBC is already quoted. The bank was founded in Hong Kong and Shanghai in 1865, but shifted its headquarters to London in 1993 after acquiring the Midland Bank.
• Hong Kong and China accounted for 40% of HSBC's pretax profits last year and analysts predict this could reach 50% over the next decade.
• A disastrous foray into the US sub-prime market, where it has been forced to write off billions because of the credit crunch, has persuaded management to return to its roots in the Far East, say analysts.  (hmm, here I thought the US was the 'safest' and 'most innovative' financial market on the globe - why run away from such a nirvana?)
• Beijing has let it be known that it is ready to start allowing foreign companies to list on the Chinese mainland, reflecting its ambitions to open up the country's financial sector and transform Shanghai into an international financial hub to rival London and New York. (again, this will take many years, well over a decade... but frankly these are the baby steps in what I believe will allow the US - if there is no change from current course - to finally not be "too big to fail"; having a viable/stable alternative will be the key.  Until then the US gets to play its reindeer games of fiscal folly - with almost zero consequences due to owning the deepest bond market and the reserve currency of the world.  A decade hence, the world will be a very different place.)

It is certainly a fascinating moment to be alive as these incremental steps are taken by the Eastern giant.  I would expect as many Western companies as possible to be lining up out the door in hopes the Chinese will approve them as well - so as to have access to all the money floating around the country. (much of it ours)

By Trader Mark

http://www.fundmymutualfund.com

Mark is a self taught private investor who operates the website Fund My Mutual Fund (http://www.fundmymutualfund.com); a daily mix of market, economic, and stock specific commentary.

See our story as told in Barron's Magazine [A New Kind of Fund Manager] (July 28, 2008)

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