HSBC Positions for Listing in Shanghai

A report Wednesday said Chinese authorities are preparing for the stock market listing of foreign companies next year, in comments that come as HSBC Holdings PLC says it is hoping to be among the first in line.

HSBC Asia-Pacific Chief Executive Sandy Flockhart beats a drum marking the opening of a branch in China's Shandong province last month.

Shanghai Vice Mayor Tu Guangshao, the city's top economic policymaker, was quoted in a local newspaper as saying that preparations are being made for listing of foreign companies on the Shanghai Stock Exchange in 2010 as an integral part of making the city a top international financial center.

China's government in the past has pledged to allow foreign listings, as well as more access for foreign investors, but has been slow to follow through.

The comments come as HSBC says it hopes to be among the first foreign companies to obtain a listing, specifically for its mainland China banking subsidiary. On Tuesday, HSBC's regional chief executive, Sandy Flockhart, said the bank has hired advisers and is otherwise taking steps toward an initial public offering in Shanghai that would help raise the company's profile in the Chinese market. It would "widen our shareholder base and to give an opportunity to those...who would like to invest in a financially diversified bank," Mr. Flockhart said.

Mr. Flockhart said Asia will remain the U.K.-based bank's primary engine of growth and that China will be "the largest part of the puzzle" over the next 25 to 50 years. He cited as a high priority the development of a stock brokerage business in China.

People familiar with the situation said HSBC has chosen China International Capital Corp. and Citic Securities Co. to handle a planned $3 billion to $5 billion Shanghai IPO. Mr. Flockhart declined to name the advisers HSBC has hired or put a value on a listing.

Mr. Flockhart said that including the eight billion yuan in registered capital in its China-incorporated banking unit, the firm's total investment in China was valued at $8.8 billion at the end of June. In China, HSBC has an 18.6% stake in Bank of Communications Co., the nation's fifth-largest lender by assets; a 16.7% holding in Ping An Insurance (Group) Co. of China Ltd.; 8% ownership of Bank of Shanghai Co., and a 49% stake in HSBC Jintrust Co, a Shanghai-based fund company.

Elsewhere in Asia, Mr. Flockhart expects India, Singapore, South Korea, Malaysia and Vietnam to be among HSBC's markets that will recover rapidly from the recent downturn. "We will see the recovery led by Global Markets and commercial banking. Wealth-management products have lost some of their short-term attractiveness, but eventually we will see that come back," he said.

HSBC's Global Markets business includes securities trading, margin financing and client hedging activities.

HSBC said Monday its Asian business earned a pretax profit of $4.52 billion in the six months ended June 30, offsetting a $3.7 billion pretax loss in its beleaguered U.S. consumer-finance operation.

The bank as a whole posted a first-half net profit of $3.35 billion, improving from a net loss of $1.99 billion in the second half of last year.

Mr. Flockhart said HSBC would choose to expand its footprint in the region organically, at least for now, after considering a number of acquisition opportunities in the first half.

"What's been on offer hasn't been significant to change the space that we are in, and we can achieve what we can do organically without risking shareholders' money on something that's not right," he said.

Even so, he said the bank won't rule out merger or acquisition deals.

Separately, Mr. Flockhart said Australia & New Zealand Banking Group Ltd.'s plan to buy some of Royal Bank of Scotland Group PLC's Asian banking operations won't likely change the competitive landscape of the region's banking sector.

"The real competitors here are the big Chinese banks and the big local competitors in local markets. International banks, apart from Standard Chartered, are less evident," Mr. Flockhart said.