<p>HSBC HOLDINGS (005) previously proposed the privatization of HANG SENG BANK (011), with a vote scheduled for early next month. If successful, HANG SENG will delist on January 27 next year, resulting in the loss of a highly representative Hong Kong financial stock from the Hang Seng Index constituents. Although in recent years, the proportion of Chinese stocks among the Hang Seng Index constituents has been increasing, especially after the number of constituent stocks has grown, the selection criteria for the Hang Seng Index still include a requirement to retain at least 20 constituent stocks defined as Hong Kong companies. Can STANCHART (2888) fill the potential vacancy in the Hang Seng Index caused by HANG SENG's delisting?</p>
<h2>STANCHART's Long-standing Presence in Hong Kong</h2>
<p>STANCHART has deep roots in Hong Kong, having commenced operations there in 1859 and establishing a presence for over 160 years. As one of the three note-issuing banks, STANCHART's position in Hong Kong is undoubtedly significant. I still remember in 2009, STANCHART issued a commemorative note with a face value of HKD 150 to celebrate its 150 years of operation in Hong Kong, which became a topic of conversation, and I still have one in my collection.</p>
<p>STANCHART may not have the most retail branches in Hong Kong, but it has never been absent during important moments for Hongkongers. For example, in the local sporting event &#34;Hong Kong Marathon,&#34; STANCHART has been the title sponsor since its first edition in 1997, without interruption. At the tourist landmark &#34;Hong Kong Disneyland,&#34; the bank you will find is STANCHART.</p>
<h2>Sharing the Role of &#34;Super Connector&#34; with Hong Kong</h2>
<p>Although STANCHART is a very Hong Kong-centric bank, it is also highly internationalized. Hong Kong is STANCHART's largest single market, accounting for 24% of the group's total revenue last year, followed by Singapore at 13%, while mainland China, India, and the United States each account for about 6%. South Korea, the UAE, and the UK are also important markets for STANCHART, and this business mix perfectly showcases Hong Kong's unique position as a global connector.</p>
<p>As Hong Kong leverages the national policy of the &#34;Belt and Road Initiative&#34; to play the role of a &#34;super connector,&#34; STANCHART's business covers 75% of the co-built markets of the &#34;Belt and Road Initiative,&#34; particularly with a solid business foundation in the Middle East. It is also the only international bank with operations in all 10 ASEAN member countries.</p>
<h2>Promoting Financial Innovation in Hong Kong</h2>
<p>In recent years, the Hong Kong SAR government has actively promoted fintech and financial innovation, and STANCHART has been a strong supporter. When the Monetary Authority began promoting virtual banks in 2018, which are now known as &#34;digital banks,&#34; STANCHART immediately applied and, in 2019, its subsidiary Mox became one of the first licensed digital banks. This year, STANCHART Hong Kong partnered with Hong Kong Telecom and Animoca Brands to establish a joint venture company, Anchorpoint, and expressed its intention to apply for a stablecoin issuer license to the Monetary Authority on August 1, the day the Hong Kong &#34;Stablecoin Regulation&#34; came into effect. STANCHART Hong Kong is also actively participating in various fintech sandbox projects initiated by the Monetary Authority and the government, as well as promoting the development of digital financial assets, fully reflecting Hong Kong's innovative spirit in the financial sector.</p>
<h2>Liquidity in Hong Kong Becomes a Challenge for Blue-Chip Status</h2>
<p>Of course, the Hang Seng Index Company has a set of established criteria for deciding which stocks to include in the Hang Seng Index. Market capitalization is an important consideration, and Standard Chartered's stock price has recently reached new highs, with a market capitalization exceeding HKD 400 billion, which is not only higher than many current blue-chip stocks but also surpasses Hang Seng Bank's market capitalization of over HKD 280 billion. However, Standard Chartered is listed simultaneously in London and Hong Kong, with the majority of shares traded in London, which may add another layer of consideration for the Hang Seng Index Company.</p>
<p>Another factor for the Hang Seng Index Company is the liquidity of the shares. Since Standard Chartered's listing in Hong Kong in 2002, its trading has not been particularly active, but recently, with outstanding stock performance and the emergence of related derivatives, trading has become more active than before.</p>
<p>In fact, Standard Chartered's shares in London are not only components of the FTSE 100 Index but also part of the STOXX Europe Large 200 and S&amp;P Global 100, highlighting Standard Chartered's position in the international capital markets.</p>
<p>From this perspective, Standard Chartered's shares are actually favored by international investors, but they tend to trade more in London than in Hong Kong. Isn't this a loss for Hong Kong? If the liquidity of Standard Chartered in Hong Kong is insufficient and it fails to be included in the Hang Seng Index, it may be a &#34;chicken and egg&#34; problem. If Standard Chartered were included in the Hang Seng Index, trading in Hong Kong would naturally become more active, and it might also be included in more regional indices. Can the Hang Seng Index Company take the first step?</p>
<p><strong>Lin Xiao Zhen</strong></p>

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<p>HSBC HOLDINGS proposed to privatize HANG SENG BANK. If successful, HANG SENG will delist on January 27 next year, and the Hang Seng Index will have one less Hong Kong financial stock. STANCHART has been rooted in Hong Kong for many years, with business coverage in the "Belt and Road" market, possessing the potential to fill the gap left by HANG SENG's delisting</p>

- HSBC Holdings has proposed the privatization of Hang Seng Bank, with a vote scheduled for early next month, aiming to delist by January 27.  
- While China's inclusion in the Hang Seng Index has increased, it still mandates retaining at least 20 Hong Kong companies; the impact of Hang Seng's exit raises questions about whether Standard Chartered can fill this gap given its long-standing presence in Hong Kong.  
- Despite recent increases in Standard Chartered's market capitalization and stock activity, factors like dual listings and liquidity concerns complicate its potential inclusion in the index.

Can Standard Chartered replace Hang Seng as a blue chip? | Lin Xiao Zhen