It’s tempting, but the devil’s in the details
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The Stockholm Stock Exchange, the Toronto Exchange, Germany’s Deutsche Boerse, Australia’s Macquarie and the American giants Nasdaq and ICE have all danced the dance with the London Stock Exchange at one time or another.
Deutsche Boerse has been the most persistent and the Americans have kept an eye on Paternoster Square. And who can blame them? The London Stock Exchange Group’s share price is up more than 2,000 per cent since it listed 20 years ago, driven by its own run of acquisitions and deals while London cemented its position as a leading financial services hub.
Yesterday, in a move that stunned the City, Hong Kong Exchanges and Clearing (HKEX) became the latest international rival to make a swoop on the London exchange, blowing in with a £30bn bid to create, in their words, a new “global market infrastructure group” that “connects East and West”.
It is, at a glance, an enticing proposition. According to research by New Financial, Hong Kong has (relative to GDP) the deepest capital markets in the world and is the fourth largest international financial centre. London comes second and a combined UK-HK operation would eclipse the EU and snap at the heels of the top ranked US market.
As one veteran City watcher said yesterday, “linking the most dynamic market in Asia with the most dynamic in Europe makes a lot of strategic sense”. For a buccaneering, post-Brexit global Britain, it would indeed be quite a statement.
However, there are some almighty obstacles – corporate, political and diplomatic. Firstly, the LSE has not welcomed this approach. It’s focused on finalising its own £20bn deal with Refinitiv – something that the architects of the Hong Kong deal oppose.
Furthermore, the chances of UK politicians and regulators satisfying themselves that the Hong Kong Exchange is sufficiently independent from Beijing are remote. HKEX is chaired by Laura Cha, a close friend of Hong Kong’s embattled chief executive Carrie Lam. The HKEX chief executive, Charles Li, has described the mass pro-democracy movements gripping Hong Kong as “not helpful”.
Simply put, the leadership of the Hong Kong exchange knows which side its bread is buttered. Frankly, leaving aside the politics, the LSE doesn’t need this deal. It sees its future in data and the Refinitiv strategy is designed to facilitate that. Their advisers on that deal now have to defend against an unwelcome gatecrasher at the party.
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