London Stock Exchange receives a £32bln bid from Hong Kong

Wednesday, 11th September 2019 15:28 - by Shant

Shares in the London Stock Exchange ramped up earlier today on news that the owner of Hong Kong's major share market, HKEX had made a surprise bid of £32bln for the UK's primary stock exchange.  CEO of HKEX, Charles Li said that the deal would 'redefine global capital markets for decades to come' and reinforce Hong Kong's position as the 'key connection' between China, Asia and the rest of the world.  

However, the deal comes with the proviso that the LSE scraps its plans to buy the data firm Refinitiv, which would make the London exchange a key rival to Bloomberg in the US.  The acquisition is a strategic move to boost its presence in the provision of financial data - its fastest growth area in recent years.  Responding to the bid this morning, LSE said that it remained committed to the deal with Refinitiv and that progress is being made.  The statement naturally confirmed that it had received an 'unsolicited, preliminary and highly conditional' offer from Hong Kong, and that an announcement would be made in due course.  

In the current climate, the move comes at a time when UK assets are proving to be great value based on the devaluation in Sterling.  Irrespective of the outcome of the Brexit negotiations in the months ahead and how the UK leaves the EU at the end of October (if it is not delayed), the UK has continued to draw interest from overseas buyers, with this following on from other acquisitions, not least of all Greene King (as I wrote about a few weeks back).  The Norwegian Wealth Fund is another major investor which has consistently outlined its plans to invest in the UK, though this deal in particular has far greater economic and political gravitas.  

Indeed, the UK government - and especially so at this moment in time - would take a dim view of such a symbolic and integral part of the UK's financial services industry moving into foreign ownership.  Given that this would also hand a key asset to China through the back door, this could also put a strain on US-UK relations, with the US currently looking to redress some of the economic imbalances which have given China increased global clout in recent years.  Needless to say, the tide of transference in UK plc would be seen as a stretch too far in this instance.  

Judging by the market reaction, it seems reality was quick to hit home.  In this day and age of reactionary dominance, the rally from £67.25 to a little over £79.00 was reversed sharply, though shares are still trading net higher on the day at £72.35 at the time of writing.  Few will believe that at this stage, a deal with HKEX is likely, but with the LSE still pressing ahead with its move for Refinitiv, there is still room to be optimistic as the stock exchange looks to build on its strengths.

The Writer's views are their own, not a representation of London South East's. No advice is inferred or given. If you require financial advice, please seek an Independent Financial Adviser.