Troubled U.K. Retailer New Look Says Goodbye to Chinese Market

British fashion chain New Look Retail Group Ltd. has given up on China, saying it doesn’t see a path to profits in the world’s second-largest economy and will leave the market this year. News from Bloomberg

Posted by Times News on Thursday, 18th October 2018

“Despite substantial investments in China in recent years, performance has been below expectations and this business has not achieved the necessary sales and profitability,” the company said in a statement Thursday morning.

New Look, owned by South African investment company Brait SE, approved a program in March to reduce its number of stores and cut its rent bill. Now it intends to close its remaining 120 stores in China by the end of 2018. It’s continuing a strategic review of other international markets.

“It’s the right decision to make,” Jefferies analyst Stephen Lienert wrote in a note to clients. It allows the company to focus on the U.K. market and online spending, he added, noting that the investment in China contributed most of the company’s operating loss in the international division.

On the same day Bloomberg news also reported HSBC Holding Plc is examining plans for the upcoming Shanghai-London trading link, a move that could see Europe’s largest bank list shares in China.

London-based HSBC is the first U.K. company to publicly state an interest in taking part in the program, which will allow firms listed on exchanges in either of the two cities to issue depositary receipts on the other’s venue.

“We are studying the proposed framework for the listing of Chinese depositary receipts under the Shanghai-London Stock Connect but cannot comment further at this time,” HSBC’s Hong Kong-based spokeswoman Vinh Tran said in an email.

An HSBC listing using the connection would be a boost for Chinese authorities, who have watched their benchmark index fall more than 20 percent this year amid a worsening economy and an escalating trade war with the U.S. The link is part of a broader effort to globally integrate China’s financial markets and internationalize its currency while maintaining some of the world’s strictest capital controls.

The plan to issue London Stock Exchange-listed HSBC shares in Shanghai is viewed as a symbolic step after years of planning, the Financial Times reported earlier, citing two unnamed people with knowledge of the matter.

"There’s strong demand for foreign stocks among mainland investors in China,” said Stanislas Beneteau, U.K. head of financial intermediaries and corporates at BNP Paribas SA in London. “We are seeing interest from clients.” The program could see 50 companies on the Shanghai and London sides list on each others’ markets within a few years, he said.

Expanding HSBC in key Asian markets including China is a core part of its strategy under John Flint, who became CEO in February. Asia contributed 77 percent to HSBC’s adjusted pretax profit in the first half.

HSBC’s former Chief Executive Officer Stuart Gulliver said in May 2011 that he wanted the bank to be the first foreign financial institution to be listed on the Shanghai Stock Exchange under an earlier proposed plan to have foreign firms list in China. The company has roots in the city; its origins date to 1865, when it operated as the Hongkong and Shanghai Banking Corp. to finance trade in opium, silk and tea.

The Shanghai-London Stock Connect has been in the works since at least 2015, when then-U.K. Chancellor George Osborne visited China. Huatai Securities Co., China’s third-largest brokerage by value, has said it plans to list in London using the link. The program may be operational as early as Dec. 3, China’s state-run Shanghai Securities News previously reported.

Editor: Jian Ping Sun

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