Market Overview

Hong Kong Exchange Calls Off London Merger Pursuit

Hong Kong Exchange Calls Off London Merger Pursuit

Hong Kong Exchanges and Clearing abandoned its $37-billion bid for the London Stock Exchange on Tuesday. The announcement prompted a 4.7% drop in the London exchange’s stock.

What Happened

The Hong Kong exchange began its effort in September to integrate and streamline transactions between the Asian and European markets.

The prospective buyer did not explain its withdrawal of the offer, but recent reports suggest the merger hit a dead end.

The London Stock Exchange Group rejected the initial bid, citing lack of credibility and no grounds for negotiation. It also raised regulatory concerns over the local government’s role in the operations of Hong Kong Exchange and Clearing.

Why It’s Important

Hong Kong had hoped to unite itself with the European markets to simplify cross-border transactions and establish continuous trading over 18-hour days.

The arrangement would have positioned China to penetrate global markets — and perhaps even influence European financial operations. The Hong Kong government appoints most of its exchange’s board members and tightly regulates the entity’s ownership.

With or without a deal, the London exchange faces existential threats. It appears to be on the losing end of Brexit proposals and has been a consistent target for global buyers, including Deutsche Borse and the Toronto Stock Exchange. Rather than sell, the British company has resolved to compete with its own acquisition strategy.

What’s Next

London Stock Exchange Group remains focused on its proposed purchase of Refinitiv, a financial data firm. The deal is set to close in 2020.

Related Links:

Skepticism Surrounds Proposed Hong Kong-London Stock Exchange Deal

Ex-NYSE CEO: Hong Kong Exchange Makes Big Bet With LSE Offer

Photo via Wikimedia


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