|Bid||247.200 x 0|
|Ask||247.600 x 0|
|Day's Range||245.000 - 247.800|
|52 Week Range||218.800 - 286.200|
|Beta (3Y Monthly)||1.49|
|PE Ratio (TTM)||33.01|
|Forward Dividend & Yield||7.44 (3.00%)|
|1y Target Est||N/A|
US stocks bounced back on Wednesday, while Treasury yields also rose, as reports China and the US could be close to a trade deal breathed new life into risk assets. The Nasdaq Composite was up 0.5 per cent, aided by gains in semiconductor shares.
(Bloomberg) -- Alibaba Group Holding Ltd.’s landmark $11 billion share sale and listing in Hong Kong on Nov. 26 was galvanized by expectations the Chinese e-commerce giant will attract a vast pool of capital from its home country. But some investors caution against unrealistic expectations, especially by mainland investors, and highlight certain restrictions that still govern -- and potentially curtail -- trading activity in Alibaba’s Hong Kong shares.The company’s sheer size and the unprecedented nature of its secondary listing (the primary listing is still in New York) and unique management structure present challenges for investors hoping to gauge everything from Alibaba’s inclusion in indexes -- crucial because they direct the flow of capital from tracker funds -- to its listing status.Here’s what we know.1\. Will Alibaba get added to the Hang Seng Index?Not right now. Alibaba will be added to Hang Seng Composite Index on Dec. 9, but it isn’t qualified to join the benchmark Hang Seng Index or the Hang Seng China Enterprise Index because they comprise only primary listings and corporations without so-called weighted voting rights (WVR).Membership of the 50-member Hang Seng is coveted by corporations because it could trigger billions of dollars of inflows from funds tracking the 50-year-old gauge. Hang Seng Indexes Co. plans a consultation in the first quarter to discuss issues including whether firms with weighted voting rights, like Alibaba, should be eligible for the HSI. Any conclusions should be published by May, Daniel Wong, its head of research and analytics, said in a statement. Even if the index compiler decides to overhaul its rules, the required process means it may not be until late 2020 before Alibaba could join the major Hang Seng benchmarks.Representatives for HKEx and Alibaba declined to comment.Read more: Why Now, and Why Hong Kong, for Alibaba’s Share Sale?: QuickTake2\. Will Alibaba be included in the stock connect program?Maybe, but a lot hinges on policy makers. China doesn’t spell out criteria or qualifications for joining the program, which allows mainland investors to buy stocks listed in Hong Kong. Unlike the HSI, the program isn’t limited to primary listings. It does require review by the China Securities Regulatory Commission, the stock market watchdog.The first companies in stock connect with weighted voting rights were Meituan Dianping and Xiaomi Corp., which mainland investors got access to in late October through the program. That’s after similarly structured Chinese firms started listing in July on Shanghai’s new tech-focused Star board. Many investors expect Beijing to ultimately allow Alibaba’s Hong Kong shares to trade through the stock link with the city as well.But it may not necessarily be in China’s best interest to do so. That’s because other U.S.-listed Chinese firms -- among the country’s largest corporations, from JD.com Inc. to Baidu Inc. -- may be encouraged to follow in Alibaba’s footsteps and conduct their own secondary listings in Hong Kong, bypassing the Shanghai or Shenzhen bourses. That may run counter to Beijing’s longstanding ambitions of developing healthy, vibrant mainland exchanges, particularly as unrest grips Hong Kong.3\. Can Alibaba change its primary listing to Hong Kong?It’s possible -- thereby attracting investors with a preference for main listings, and at the same time scoring brownie points with some in Beijing who could view that as supporting China’s policy ambitions. Alibaba was given the green light to list in Hong Kong based on a new “Secondary Listing” rule, or Chapter 19C. It allows companies to conduct follow-on share offerings without complying with more stringent rules laid down by Hong Kong Exchanges & Clearing Ltd. governing first-time listees.Alibaba may enjoy special status in having more freedom to comply with Hong Kong listing requirements. Under rules laid out in a consultation paper in April last year, Chinese firms that went public before Dec. 15, 2017 don’t need to comply with “WVR” safeguards if they later switch their primary listing to Hong Kong. Alibaba, which debuted in New York in 2014, said in its Hong Kong listing prospectus it’s a “WVR” company similar to Meituan and Xiaomi.Meanwhile, Alibaba employs a fairly unique structure in which a group of partners have the right to nominate a majority of the firm’s board -- exerting outsized influence on Alibaba’s direction.In addition, Hong Kong listing rules say if trading volume there exceeds 55% of global turnover over an entire fiscal year, the stock has to adopt primary listing status in Hong Kong. HKEx gives such Chinese companies a year to comply. But with Hong Kong’s stock registration office listing just 23% of outstanding Alibaba shares as of Nov. 28, a majority of trading volume occurring there may be a tall order.\--With assistance from Paul Geitner and Fox Hu.To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at firstname.lastname@example.orgTo contact the editors responsible for this story: Peter Elstrom at email@example.com, Edwin Chan, Kevin KingsburyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
SHANGHAI/LONDON, Dec 2 (Reuters) - The Shanghai International Energy Exchange (INE) plans to launch a copper contract next year that will open the door to foreign investors wanting to hedge exposure in China, the Shanghai Futures Exchange said on Monday. China is the top global consumer of raw materials and has some of the world's most liquid commodities futures markets, but foreign companies have limited access to these markets. The Shanghai Futures Exchange (ShFE), which owns INE, currently offers a copper futures contract, but it is not open to foreign participation and is subject to value-added and import taxes.
(Bloomberg) -- Alibaba Group Holding Ltd. rose 6.6% in its Hong Kong debut, fueling the ambitions of China’s largest internet company as well as an Asian city rocked by violent anti-government protests.Chairman Daniel Zhang, lieutenants wearing Alibaba lapel pins and Hong Kong dignitaries were on hand to strike the opening gong Tuesday at a celebration of the city’s biggest stock listing this year. The company presented a Chinese-style painting to the exchange -- a souvenir to go with the showy coming-out party. The Chinese e-commerce giant’s shares rose to HK$187.60, versus a HK$176 issuance price. They traded under the code 9988 -- auspicious numbers in Chinese culture that signify prosperity.Asia’s most valuable corporation raised about $11 billion in the financial hub’s largest issuance of stock since 2010, a triumph for a stock exchange that over the years lost many of China’s brightest technology stars to U.S. rivals. Now, the blockbuster debut by one of China’s most successful companies signals confidence in Hong Kong’s future even as pro-democracy protests grip the city, earning Alibaba goodwill in Beijing. It makes it easier for investors in the mainland to buy and sell Alibaba shares, which are primarily listed in New York.It’s also a homecoming for Alibaba, whose decision to hold its $25 billion initial public offering five years ago in New York dealt a blow to Hong Kong’s ambitions. Listing closer to home has been a long-time dream of billionaire co-founder Jack Ma’s. More broadly, his company has been trying to sustain growth at a time the engines of China’s economy are sputtering. Like fellow internet giant Tencent Holdings Ltd., Alibaba’s exploring new markets as China clashes with the U.S. over everything from trade and technology to investment.“We came home. We came back to list in Hong Kong,” Zhang said to applause. “It helped make up for our regret five years ago.”Why Now, and Why Hong Kong, for Alibaba’s Share Sale?: QuickTakeA marquee name like Alibaba’s could draw investors and boost trading liquidity for Hong Kong Exchanges & Clearing Ltd., which just saw its biggest profit slump in more than three years following a failed bid to buy its London counterpart in September. Efforts to court Alibaba emanated from the very top, with Chief Executive Carrie Lam, Hong Kong’s leader, herself lobbying Ma.The Chinese company’s decision to forge ahead despite a recent escalation in protest-related violence pleased officials trying to persuade the world that the troubled city still has a future as a financial hub. Alibaba’s sale could tempt Chinese tech unicorns from Didi Chuxing Inc. to ByteDance Inc. to opt for Hong Kong over the U.S. if they eventually go public.“Alibaba will be the leading light for bringing more companies in,” Andrew Sullivan, a director at Pearl Bridge Partners, told Bloomberg Television. “You may see some new money being allocated. The keen competitor is going to be Tencent, which has historically traded at a premium.”The new funds now help Alibaba finance a costly war against homegrown rivals nipping at its heels. It could swell the company’s cash pile to about $44 billion, more than any other internet company and roughly double that of arch-rival Tencent’s. The capital could bankroll competition with Tencent and Baidu Inc. in cloud computing and entertainment, with Meituan Dianping in food delivery and travel, and with everyone in terms of investing in promising startups that yield technology, talent or market share. And it could divert investor cash from those rivals -- Alibaba is now the largest corporation to be listed in Hong Kong, pipping Tencent for the title.Demand for Alibaba’s stock surpassed supply by several times and more shares were allocated to small investors. It’s a feather in the cap for Zhang, who took over as chairman from Ma in September. The former accountant is now spearheading the company’s expansion beyond Asia as well as into adjacent business lines from cloud computing to entertainment, logistics and physical retail.Alibaba could put the capital to work investing in new technologies such as artificial intelligence, or fast-expanding affiliates such as Ant Financial. Courting investors closer to home also serves as a buffer of sorts should U.S.-Chinese tensions worsen. Already, U.S. lawmakers such as Senator Marco Rubio are agitating for measures to curb investment flows to Chinese companies, including the extreme option of tossing U.S.-listed firms off American bourses.Read more: Alibaba’s Sales Jump 40% Despite Cooling China Economy(Updates with share action from the first paragraph.)To contact the reporters on this story: Lulu Yilun Chen in Hong Kong at firstname.lastname@example.org;Kiuyan Wong in Hong Kong at email@example.comTo contact the editors responsible for this story: Peter Elstrom at firstname.lastname@example.org, Edwin Chan, Vlad SavovFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
(Bloomberg Opinion) -- Hong Kong is doing everything it can to ensure Alibaba Group Holding Ltd.'s listing is a roaring success. That's turning the $12 billion mega-sale into a hot item — if you can get your hands on the shares.Alibaba will initially offer only 2.5% of the offering to individual investors, a quarter of the allocation specified in Hong Kong’s listing rules and half the 5% level typically allowed for sales valued at more than HK$10 billion ($1.3 billion). The retail portion may be increased to as much as 10% depending on the level of demand, though that’s still well below the 50% that the listing rules require for the most heavily subscribed offers.The effect of squeezing down the retail offering may be to increase the perceived rarity value of Alibaba shares, magnifying the buzz around what may be Hong Kong’s biggest share sale since 2010. For example, an allocation that is barely covered at 10% would be four times subscribed at 2.5% with the same level of demand.Hong Kong Exchanges & Clearing Ltd. has done its utmost to accommodate Alibaba, introducing rules that allow dual-class shares after resisting change for a decade — and losing the company’s $25 billion initial public offering to New York in 2014. The word “waiver” appears 80 times in Alibaba’s prospectus.With Hong Kong’s economy and markets rocked by protests, there’s much riding on a successful sale. After the listing, HKEX will be home to Asia’s two largest technology companies in Alibaba and Tencent Holdings Ltd. That could help the exchange attract more tech plays such as Southeast Asian ride-hailing giants Grab Holdings Inc. and Gojek.There are reasons to expect Alibaba’s Hong Kong stock to do well. Many mainland Chinese investors will get their first chance to buy shares of the country’s most valuable corporation, once Alibaba is included in the “stock connect” trading pipes that link Hong Kong with the Shanghai and Shenzhen exchanges. Capital controls prevent Chinese investors from easily accessing overseas stock markets, meaning that only those with money parked outside the mainland can trade Alibaba’s U.S. stock. And Chinese technology companies often attract higher valuations on local exchanges than overseas.Alibaba is at the forefront of China’s digital and consumer economies, with its Taobao and Tmall sites continuing to thrive as weakening growth prompts more people to seek bargains online. The company reported record sales for its Singles’ Day shopping festival on Nov. 11 and posted a 40% surge in September-quarter revenue. Its New York-traded stock had risen 33% this year as of Thursday’s close, and 54 of 55 analysts tracked by Bloomberg rate the stock a buy (the other is a hold).Institutions are sure to support the sale, encouraged by expectations of a wall of Chinese money joining them. Demand will come from Asian funds that have overlooked Alibaba previously because they want to trade in their own time zone. Hedge funds also sense opportunity. An expected price gap between Alibaba’s New York and Hong Kong shares is fueling a colossal arbitrage trade, Fox Hu and Carol Zhong of Bloomberg News reported Nov. 14. Alibaba will raise as much as $13.4 billion if an over-allotment option is exercised. The institutional offering will be priced on Nov. 20.In a possible fillip for retail demand, the offering will be Hong Kong’s first fully paperless listing, according to Reuters. Whether by accident or design, that means individuals won’t have to line up at banks or brokerages to obtain application forms — a potential deterrent given the unrest. Even the numbers associated with the listing are auspicious. Alibaba has capped the per-share price for individual investors at HK$188 apiece — double eight is particularly lucky in Chinese. And the company will trade under the stock code 9988, which sounds like “forever prosperous.” It looks like no one is leaving anything to chance. To contact the author of this story: Nisha Gopalan at email@example.comTo contact the editor responsible for this story: Matthew Brooker at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Nisha Gopalan is a Bloomberg Opinion columnist covering deals and banking. She previously worked for the Wall Street Journal and Dow Jones as an editor and a reporter.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
Chinese e-commerce giant Alibaba is set to price its first share sale in Hong Kong next week, raising up to $13.4 billion in what will be the largest deal in the city since 2010 and the world's biggest ever cross-border secondary listing. WHY IS ALIBABA LISTING IN HONG KONG? Alibaba, which is due to start trading on Nov. 26 in Hong Kong, could also benefit from Chinese demand.
(Bloomberg) -- Alibaba Group Holding Ltd. priced the retail portion of its Hong Kong share sale Friday, issuing an appeal to individual investors in a city in the throes of recession after months of violent pro-democracy protests.The largest Chinese e-commerce company capped the 12.5 million shares available to individual investors at HK$188 apiece -- an auspicious number in Chinese culture -- making it the most expensive first-time share sale in Hong Kong. Alibaba said it may price the remainder of its 500 million-share offering above that ceiling, signaling that it aims to raise at least $12 billion in what would be one of the world’s largest sales of stock this year. The company will price the rest of its international offering by Nov. 20.Asia’s largest corporation is proceeding with what could be Hong Kong’s biggest share sale since 2010. Slated for late November, it’ll be the Chinese e-commerce juggernaut’s official Asian coming-out party -- half a decade after snubbing the financial hub for a record Wall Street debut. Alibaba’s return hands a much-needed victory to a city wracked by protests since the summer, and will please Chinese officials who’ve watched many of the country’s largest private corporations flock overseas for capital. If the deal goes through, Alibaba will challenge Tencent Holdings Ltd. for the title of the largest Hong Kong-listed corporation.“The listing in Hong Kong will allow more of the company’s users and stakeholders in the Alibaba digital economy across Asia to invest and participate in Alibaba’s growth,” the company said. “During this time of ongoing change, we continue to believe that the future of Hong Kong remains bright,” Daniel Zhang, chief executive officer of Alibaba, said in a letter to investors.Read more: Alibaba Is Taking Orders for $11 Billion Hong Kong ListingListing closer to home has been a long-time dream of billionaire Alibaba co-founder Jack Ma’s. A successful Hong Kong share sale could help finance a costly war of subsidies with Meituan Dianping in food delivery and travel, and divert investor cash from rivals like Meituan and WeChat operator Tencent. It will also be a feather in the cap for Zhang, who took over as chairman from Ma in September. The former accountant is now spearheading the company’s expansion beyond Asia but also into adjacent markets from cloud computing to entertainment, logistics and physical retail.What Bloomberg Intelligence SaysAlibaba’s secondary listing in Hong Kong could lead to a shake up of the Hang Seng Index, the city’s main stock benchmark. The 50-member index is heavy on financial stocks, when comparing weights to other leading equity indexes in the world. Meanwhile, IT, industrials and consumer discretionary stocks are severely underrepresented.\- Steven Lam, analystClick here for the researchA marquee name like Alibaba’s could draw investors and boost trading liquidity for Hong Kong Exchanges & Clearing Ltd., which just incurred its biggest profit slump in more than three years. For Hong Kong, it’s bit of welcome news following half a year of often violent protests that have at times paralyzed the city and its service industry. Efforts to court Alibaba emanated from the very top, with Chief Executive Carrie Lam herself exhorting Ma to consider a listing in the city.Alibaba has considered a Hong Kong listing for a long time, Michael Yao, head of corporate finance at Alibaba, said on a call with investors this week. The deal size hasn’t changed as a result of the protests, he added.(Updates with details of price per share comparison in second paragraph)\--With assistance from Zhen Hao Toh.To contact the reporters on this story: Lulu Yilun Chen in Hong Kong at email@example.com;Alistair Barr in San Francisco at firstname.lastname@example.orgTo contact the editors responsible for this story: Peter Elstrom at email@example.com, Edwin Chan, Colum MurphyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Hong Kong Exchanges and Clearing on Wednesday reported a better than expected 10 per cent decline in net profit during the third quarter even as stock market turnover and fundraising activity fell due to unprecedented anti-government protests.HKEX, which operates Asia's third-largest stock market and owns the London Metal Exchange (LME), said that its July to September quarter net profit stood at HK$2.2 billion (US$280 million), down from HK$2.44 billion a year earlier. On a quarterly basis, net profit declined by 15.4 per cent from HK$2.6 billion in the April to June period before the city was hit by violent protests.Its earnings per share of HK$1.76 per share beat market forecasts of HK$1.6, according to analysts polled by Bloomberg.Its third-quarter revenue fell 6 per cent year on year to HK$3.34 billion, again beating consensus estimates of a 10 per cent drop.Charles Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing, said the bourse operator had a good nine months despite geopolitical challenges. Photo: Jonathan Wong alt=Charles Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing, said the bourse operator had a good nine months despite geopolitical challenges. Photo: Jonathan WongThe third quarter was disappointing for the HKEX chief executive Charles Li Xiaojia. Besides the lower turnover and fewer initial public offerings, he also failed in his £29.6 billion (US$38.12 billion) bid to buy the London Stock Exchange launched on September 11, as it was rejected by the board of the London bourse."We were disappointed not to proceed with a firm offer for LSEG (London Stock Exchange Group), but we remain resolutely focused on the successful execution of our three-year strategic plan, maintaining good cost discipline and capturing future growth opportunities," Li said in the results statement. Hong Kong edges past Nasdaq as the world's third-quarter IPO hub"Set against a challenging broad geopolitical backdrop, HKEX has had a good first nine months of 2019. Record stock connect revenue, recent resurgence in the IPO market and good returns from investment income offset some macro-driven softness in cash market volumes.For the first nine months of this year, HKEX's net profit fell 1 per cent to HK$7.41 billion from HK$7.48 billion a year earlier.According to Bloomberg's consensus estimates, the exchange may find it hard to achieve its full-year net profit growth of 2 per cent to HK$9.48 billion if the protests continue. "The stock market turnover has gone down and so has the trading fee and settlement fee incomes. This has hurt the stock exchange's profit outlook," said Gordon Tsui Luen-on, chairman of Hong Kong Securities Association.The average daily turnover in the third quarter dropped 16 per cent year on year to HK$77 billion, while the nine-month turnover stood at HK$90.5 billion, a 21 per cent decline from HK$114.7 billion a year earlier, according to HKEX data.Listing fee fell by 10 per cent during the quarter as the amount raised from IPOs plummeted by 63 per cent to US$7.13 billion " the lowest in two years, according to financial data provider Refinitiv. The number of IPOs also decreased to 22 from 52 a year earlier."However, the Hong Kong IPO market has become active again since September after the market sentiment improved. Hong Kong still has a chance to beat New York to reclaim the crown as the No. 1 IPO market worldwide for the full year," Tsui said.China Feihe, whose baby milk formula is endorsed by actress Zhang Ziyi, completed its IPO on Wednesday. It is expected to raise up to US$1.14 billion if it can price its shares at the top end of the range, making it the third-largest IPO this year and the fourth IPO to raise more US$1 billion over the past two months. The offering is only less than Budweiser Brewing Company APAC's US$5.8 billion IPO in September and ESR Cayman's US$1.6 billion last month. Chinese sportswear manufacturer Topsports International Holdings also raised US$1 billion last month.Hong Kong Exchanges and Clearing owns the London Metal Exchange. Photo: AFP alt=Hong Kong Exchanges and Clearing owns the London Metal Exchange. Photo: AFPTurnover of metals contracts on the LME fell 4 per cent in the first nine months of the year to 618,000 lots. Meanwhile, the two stock connect schemes continue to bring additional revenue to the exchange. The average daily turnover from northbound trading " which refers to trading of A shares listed in Shanghai and Shenzhen via the HKEX " reached US38.5 billion, the second-highest quarterly turnover. The turnover via the connect schemes during the first nine months had doubled from a year earlier after major index compilers MSCI and FTSE Russell added the mainland traded shares to their benchmark indices.HKEX's costs during the first nine months fell 1 per cent to HK$2.9 billion as a result of a change to the accounting standard treatment on lease. If the effect is stripped, expenditure rose 6 per cent during the period due to higher staff and IT costs. HKEX shares closed 0.72 per cent higher at HK$252 on Wednesday after the result announced at lunch break.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
Hong Kong's stock exchange operator said quarterly profit dropped 8%, the steepest slide in nearly three years, as investor sentiment was hit by months of political unrest that pushed the Asian financial hub into recession. Hong Kong's Hang Seng index declined 8.6% during the quarter to end-September, marking its worst quarter in four years. While Hong Kong's pro-democracy protests show no signs of abating, the exchange's earnings could be bolstered by a pick up in IPOs in the fourth quarter.
A look at the shareholders of Hong Kong Exchanges and Clearing Limited (HKG:388) can tell us which group is most...
Startup steel trading firm Mettalex is in talks with exchanges about launching a new scrap contract focused on Asia, the firm's head said on Wednesday. Growing trade in steel scrap delivered in containers is ripe for a derivative, said Phillip Price, managing director of Mettalex which has its official launch on Friday. "We are big believers in the idea of a containerised scrap derivative product for south or east Asia.
Chinese biopharmaceutical company, Alphamab Oncology, plans to seek listing approval early next month for a Hong Kong initial public offering (IPO) of up to $350 million, people with direct knowledge of the matter said. Alphamab plans to carry out a deal roadshow and go public by the end of the year, the people added, as the Asian financial hub gets back into business after a freeze in recent months amid frequently violent anti-government protests. The company, backed by Hong Kong-based investment firm PAG, has appointed CLSA, Jefferies Financial Group and Morgan Stanley as sponsors to its IPO - a deal that has been in the planning stages for at least five months.
Hong Kong bourse Chief Executive Charles Li said there are fundamental flaws in the "one country, two systems" formula that govern the former British territory. The comments by Li mark a rare public condemnation from a senior Hong Kong business executive of the Beijing-backed administration under which the territory is ruled at a time when it is grappling with its biggest political crisis in decades. "The great concept, the great creation of one country, two systems is really, has some fundamental flaws at the very beginning of the implementation," he said.
The London Metal Exchange (LME) said on Tuesday it would create a committee to represent the interests and views of producers and users of lithium, a key ingredient in batteries. The LME said the committee was likely to include representatives of nine companies including vehicle makers Tesla and Jaguar Land Rover and lithium producers and processors Tianqi Lithium Australia, BASF and Albemarle. The LME plans a lithium contract, but has given no timeline for an official launch.
In 2010 Charles Li was appointed CEO of Hong Kong Exchanges and Clearing Limited (HKG:388). First, this article will...
Hong Kong stock exchange boss Charles Li ignited his unrequited overture to the London Stock Exchange with a riff on Romeo and Juliet as a corporate romance, and doused it in a wistful blog reference to the author of 'Alice in Wonderland'. After this week dropping the shock $39 billion approach, will Chief Executive Li's next post outlining a strategic vision for the bourse swap British literary references for a metaphor from a Chinese classic? Investors and analysts expect Hong Kong Exchanges & Clearing (HKEX) to refocus its efforts - for now - on expanding its links with mainland Chinese counterparts following the collapse of its ambitions to build a global exchange platform via a merger with the London Stock Exchange Group (LSE) .
Hong Kong Exchanges and Clearing Limited (HKEX) refrained from sweetening its £29.6 billion (US$36.4 billion) bid to buy the London Stock Exchange Group (LSEG), after its overtures to create one of the world's largest financial marketplaces were spurned by London executives."The board of HKEX continues to believe that a combination of [London Stock Exchange Group] and HKEX is strategically compelling and would create a world-leading market infrastructure group," the Hong Kong operator said in a regulatory statement on Tuesday morning. "Despite engagement with a broad set of regulators and extensive shareholder engagement, the board of HKEX is disappointed that it has been unable to engage with the management of LSEG in realising this vision, and as a consequence has decided it is not in the best interests of HKEX shareholders to pursue this proposal."By not making a so-called formal offer ahead of Wednesday's deadline, the HKEX will not be able to pursue a bid for the London bourse operator for at least six months, according to United Kingdom takeover rules.HKEX shares rose by as much as 2.7 per cent in Hong Kong, in their biggest intraday advance in a month, as investors were relieved that the operator would not raise its financial leverage to buy LSEG. HKEX shares rose to an intraday high of HK$232.20.HKEX has just announced that it will not proceed with an offer for the London Stock Exchange Group. Read the announcement and the thoughts of Chief Executive Charles Li in his latest blog. https://t.co/vnEJLDFMGV pic.twitter.com/Jxv6CwphVn" HKEX 香港交易所 (@HKEXGroup) October 8, 2019The decision was a setback for HKEX's Chief Executive Charles Li Xiaojia, who announced his surprise cash-and-stock bid for LSEG on September 11 at £83.61 per LSE share.The combination of the two exchanges would have created one of the world's largest markets for financial instruments, with an 18 hour trading window that spanned time zones from Asia to Europe, making it more attractive for giants such as Saudi Aramco to raise capital, compared with the New York Stock Exchange and Nasdaq. HKEX was the world's top destination for initial public offerings (IPOs) in six of the past 10 years.Li, a former journalist before he became an investment banker, channelled Lewis Carroll, the much-loved British author of Through the Looking Glass."I don't have a crystal ball, but I'm reminded of Carroll, who once said, 'We only regret the chances we didn't take.' My job as CEO at HKEX is, along with the board and the management team, to make sure we take those chances with our eyes wide-open, balancing risk and opportunity," Li said in a blog post on Tuesday. "I need to be rooted in our day-to-day business but forward-focused, certain that if we try something and it doesn't work, we are strong enough and diverse enough to dust ourselves down and move forward. And today, in the absence of a looking glass, I am as certain as I can be, that we are."Li's unexpected bid for LSEG, unveiled within days of a surprise visit to London, came hot on the heels of the London bourse's US$27 billion bid to buy the financial data provider Refinitiv. The HKEX bid was conditional on LSEG dropping its Refinitiv purchase.On Tuesday afternoon, LSE said it remained committed to and "continues to make good progress" on the proposed acquisition of Refinitiv, which is expected to close in the second half of 2020."The announced offer was already very high, and there is no way for the HKEX to raise it further to satisfy LSEG's shareholders," said Christopher Cheung Wah-fung, a local legislator representing the financial services sector, who is also the founder and chief executive of Christfund Securities."As an HKEX shareholder, I do not support the local bourse wasting its time on another overseas M&A;," said Cheung, whose brokerage received HKEX shares when the exchange operator listed in 2000. "It should instead focus more to strengthen its IPO process to attract more companies engaged in China's Belt and Road Initiative to list here. The only sensible deal would be to collaborate more with the stock exchanges of Shanghai and Shenzhen."To be sure, the London bourse had tried to merge before, but failed to get regulators' approval to combine with the Deutsche Boerse two years ago. US$36.6 billion offer for London Stock Exchange boosts Hong Kong M&A;The London bourse operator rejected the HKEX deal on September 13 in a strongly worded letter, questioning its strategic sense and whether it could receive regulatory approval.At Sibos 2019 in London, on September 24, David Schwimmer, LSE's chief executive, said the exchange preferred Shanghai over Hong Kong as a long-term partner to access the Chinese markets."For the long term? For the financial centre of China? We view Shanghai as the financial centre of China," Schwimmer said. "We value that partnership with the Shanghai Stock Exchange, we think it's mutually beneficial. In June, we launched Shanghai-London Stock Connect, the first of its kind."The Connect scheme, a cross-border investment channel that allows Chinese investors to gain access to European equities via London, and for global investors to trade in Shanghai-listed shares via the LSEG, currently features one Chinese company in Huatai Securities, while China Pacific Insurance said last month it would list in London at a later date. No UK-based company is currently listed in Shanghai.HKEX put on a charm offensive to try to convince LSE shareholders to accept the deal, hiring HSBC and UBS to lobby shareholders directly. Several LSE shareholders urged the Hong Kong bourse operator this month to raise the offer by 20 per cent, according to a Reuters report.Some HKEX shareholders, however, were opposed to a potential improved bid, saying it presented more risk to them, including whether regulators would sign off on the combination."The abandoning of the acquisition of LSE will boost the share price of HKEX, as it means the bourse operator will not need to borrow a huge sum of money for the deal," Gordon Tsui Luen-on, broker and HKEX shareholder, as well as chairman of the Hong Kong Securities Association, said on Tuesday.He said he supported the deal. "HKEX's takeover of LSE would help the local stock exchange to expand its global footprint. However, I would not have agreed to further raising the offer price, as that would mean the HKEX would have to shoulder more debt than the original proposal, which might add to HKEX's the financial burden," Tsui said."The HKEX might consider other acquisition targets for expanding its business in the future," he added. Hong Kong may have lost US$4 billion to Singapore during protests: reportThe bid for LSE came as Hong Kong has faced one of its worst political crises this summer, one that has raised questions about its future as an international financial centre.Protesters have taken to the streets over the past four months to demonstrate against a controversial extradition bill that would have made it easier to send criminal suspects to mainland China for trial.The bill has been formally withdrawn, but the protests " marked by increasingly violent clashes between demonstrators and police " have evolved into a larger discussion about income inequality, affordable housing and China's growing influence over the city.At the same time, the UK is undergoing its own political crisis as it prepares to exit the European Union, possibly as soon as the end of this month. Questions remain about whether the UK will seek an extension, or crash out of the 28-nation bloc with no agreement.This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2019 South China Morning Post Publishers Ltd. All rights reserved. Copyright (c) 2019. South China Morning Post Publishers Ltd. All rights reserved.
London Stock Exchange Group shares stumbled 6% after Hong Kong Exchanges & Clearing said "it is not in the best interests of HKEX shareholders to pursue" its takeover bid. The LSE had said it was opposed to the offer.