In a stunning development, Hong Kong Exchanges and Clearing has moved to attempt a $39 billion acquisition of the London Stock Exchange. However, the proposal depends on the latter dropping its intention of acquiring Refinitiv, a data firm.
Massive tensions are flowing over both Hong Kong and London when it comes to politics, and Hong Kong Exchange’s attempt has the intention of developing a global trading power that is better prepared to cope with the increasing competition with American rivals like the CME and ICE.
For quite some time now, the London Stock Exchange has wanted to solidify its presence in Asian soil. That is why it recently decided to launch a link scheme with Shanghai, a direct rival of HKEX.
Developing an Industry-Leading Ecosystem
The Hong Kong Exchange made an announcement on the matter on Wednesday, saying that joining forces with LSEG can represent an opportunity to develop an industry-leading market ecosystem. Although the statement didn’t say it, it is clear that HKEX and LSE are looking to form a powerhouse that can compete with the best of the field.
The London Stock Exchange stated that it would examine the proposal in-depth, but immediately warned that it still has intentions of going through with the acquisition of Refinitiv. The LSE reported positive talks with a consortium led by American private equity company Blackstone over its potential purchase.
The intentions of the Hong Kong entity come at a time in which the United Kingdom is ready to abandon the European Union, which has led some analysts and politicians to think that Britain’s influence and power as a primary financial hub will be diminished.
Over history, the London Stock Exchange has been involved in several failed high-profile mergers, so it remains to be seen if the latest approach made by the Hong Kong Exchange will be successful.
Long-Term Success in London and Hong Kong
HKEX stated that it has the intention of contributing all of its resources to support and build long term success for London and Hong Kong as prominent financial centers. Stock brokers are actively monitoring the situation because if there is news regarding the move, day trading could be impacted.
According to the HKEX, the entity has already played a crucial role in cementing London’s position as a metals trading powerhouse. It should be noted that the HKEX owns the London Metal Exchange.
The deal on the table is worth 31.6 billion pounds but is contingent on LSE declining to acquire Refinitiv, per information provided by the HKEX. Specialists in the matter say that Hong Kong’s proposal is a defensive move to avoid seeing the LSE becoming another fierce competitor.