China Tax on Offshore Insurance Returns Triggers Prudential, HSBC Selloff

Shares of London-listed financial giants including Prudential Plc and HSBC Holdings plc plunged after Chinese authorities began taxing some residents’ returns from offshore insurance policies.

Prudential shares fell as much as 13% in London trading on Aug. 5 before closing down 6.4%. HSBC dropped as much as 6% and ended 4.7% lower, while Standard Chartered declined 1.6%.

The selloff followed a Caixin report that tax authorities in Beijing and Hangzhou had collected individual income tax on returns from some Hong Kong insurance policies. The cases involved policy dividends and interest earned on prepaid premiums, with a tax rate of 20%, according to tax lawyers, commercial banks and Hong Kong insurance industry insiders.