|Bid||2.870 x 0|
|Ask||2.890 x 0|
|Day's Range||2.870 - 2.930|
|52 Week Range||2.210 - 5.600|
|Beta (3Y Monthly)||1.38|
|PE Ratio (TTM)||N/A|
|Earnings Date||Mar 27, 2019|
|Forward Dividend & Yield||N/A (N/A)|
|1y Target Est||5.30|
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 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. Only 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 were trading 0.2 per cent higher at HK$250.8 in afternoon trading.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.
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.
Hong Kong's bourse on Tuesday scrapped its unsolicited $39 billion approach for London Stock Exchange Group (LSE) after failing to convince LSE management to back a move that could have transformed both global financial services giants. The Hong Kong exchange had said the LSE would have to ditch the Refinitiv purchase for its offer to go ahead.
Hong Kong's bourse has scrapped its unsolicited $39 billion approach for London Stock Exchange Group after failing to convince LSE management and investors to back a move that could have transformed both global financial services giants. Last month's surprise cash-and-shares approach threatened to upend the LSE's $27 billion plan to buy data and analytics firm Refinitiv. The Hong Kong exchange had said the LSE would have to ditch the Refinitiv deal for its offer to go ahead.
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On a sunny day in September 2018 the directors of Hong Kong's stock exchange gathered in a hotel meeting room to discuss the best way to take the bourse forward. They reached a bold decision " they would try to buy the London Stock Exchange (LSE) to create a giant trading framework that bridges east and the west.The meeting, which lasted a whole day, covered every aspect of a three-year strategic plan (2019 - 2021) for the exchange, according to a source who wished to remain anonymous. It included a range of suggestions to add new products and measures to boost the status of the exchange, to make it the leading asset management platform in Asia and bolster its role as a gateway for mainland China investment.It was during this conference that Charles Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing, and some of his advisers presented the idea of using mergers and acquisition as a short cut for the bourse operator to diversify its business model away from a focus on the initial public offerings of Chinese companies.The HKEX, however, did not act immediately on its plan to buy its London counterpart and may now have missed the boat."It is much harder for the HKEX to proceed with the LSE acquisition now than a year ago given the global economic situation. Most importantly, the anti-government protests in recent months have hit market turnover hard as well as the international image of Hong Kong," said Clement Chan Kam-wing, managing director of accounting firm BDO.It wasn't until September 11 this year that HKEX surprised the market with an unsolicited offer of US$36.6 billion in cash and new shares to acquire the centuries-old LSE.The local bourse, which operates Asia's third-largest market, must now make a formal offer " possibly an improved one " before a deadline at close of business next Wednesday (October 9), according to the UK takeover code. If passed, it would be the largest exchange merger in history. HKEX shareholders voice concern against raising bid for LSEWhile HKEX needed a year to turn its idea into action, it took the LSE board just two days to reject the offer, saying it preferred Shanghai Stock Exchange as its partner giving it access to the mainland Chinese market. In a brutal rebuttal, the LSE also raised questions about the future of the Hong Kong exchange as a gateway to China as violent anti-government protests that have plagued the city for almost four months show no signs of ending.HKEX has not given up and has hired HSBC and UBS to help lobby shareholders of the LSE. The deal will need to get approval from shareholders of both bourses as well as regulators in the UK, the US, Italy, France and Europe.Some LSE shareholders are demanding the HKEX raise its offer price by 20 per cent, according to a Reuters report on Friday morning, while some HKEX shareholders told the Post that they would object to taking the price much higher.But why was HKEX so keen to take over LSE in the first place? It has to do with that meeting a year ago.HKEX has successfully built a world-leading IPO market that has ranked top of the global league table six times in the past decade. But it heavily relies on mainland Chinese companies.In fact, Chinese firms represented 68 per cent of market cap and 95 per cent of all funds raised through IPO in Hong Kong last year."With mainland China gradually opening its markets to international investors, the role of Hong Kong as a gateway to China will be eroded in the long term. HKEX will [therefore] need to diversify its business models to have different products and markets. M&A; with the right target would be a short cut to achieve such a goal," said a source familiar with what went on at the meeting.The source said the £1.39 billion purchase in 2012 of the London Metal Exchange (LME), for example, had proved successful in helping HKEX to step into commodities trading.The 13 board members of the HKEX, and their advisers, discussed several potential targets and concluded the most ideal one was the London Stock Exchange."London Stock Exchange has a strong clearing business while it is also strong in technology and data businesses. It operates in a different time zone while it has little overlap with the HKEX business," the source said.The HKEX, however, did not put the purchase plan into action immediately because it wanted to wait and see how Brexit " Britain's bid to leave the European Union " panned out, the source said. The UK's departure was initially scheduled for the end of March this year.This wait-and-see approach may have caused the HKEX to miss the best time to pounce, because a year on, the global and local economies are in a slide. The Brexit process is still dragging on while the US-China trade war that started over a year ago has only escalated.Back home, and Hong Kong was riding high a year ago. It had just launched the high-speed train connecting to mainland cities as well as the Hong Kong-Zhuhai-Macau Bridge to bring thousands of mainland tourists to Hong Kong. These new transport infrastructure were credited with helping drive up third-quarter GDP growth last year to 2.9 per cent.Fast forward a year, and things are very different in Hong Kong.The huge anti-government protests that started on June 9 have driven away tourists and savaged retail sales, with Financial Secretary Paul Chan Mo-po last month warning that the city may go into a technical recession in the third quarter.A year ago, HKEX enjoyed the advantage of being the only market worldwide to have two stock connect schemes, linking it to Shanghai and Shenzhen. But in June this year, LSE launched its own version of the scheme with the Shanghai Stock Exchange.HKEX's Li, a former investment banker and a veteran dealmaker, disagrees that the deal is badly timed."In reality, there is seldom a perfect time to undertake a merger or acquisition," he wrote on his personal blog when he announced the LSE bid. "Given the current uncertainties in global geopolitics and economics, you could be forgiven for thinking that the time would not be now to make a major investment in a cross-border acquisition."However, this is a highly compelling transaction that stands up on its own, whatever the noise, and if we do not try, then of course by definition we fail."Li, who has been the CEO since January 2010 and led the HKEX to its first overseas acquisition by spending £1.39 billion on the London Metal Exchange (LME) in 2012, has a strong belief in the deal."Together, they will create a world-leading global exchange that spans Asia, Europe and the United States with a market value of more than US$70 billion," he said.Laurence Li Lu-jen, chairman of the Financial Services Development Council (FSDC), a government-appointed industry promoter, shares his view."It is very brave for the HKEX to propose a marriage between HKEX and LSE. It makes sense to bring the strength of the two exchanges together," he said. "It is such a large deal, so it needs a lot of time to study before taking into action."He also believes the LSE would benefit from the merger, with HKEX as a gateway to China.The two stock connect schemes between Hong Kong and the mainland bourses cover more than 2,000 stocks and allow investors to carry out billions of dollars in cross-border trading. The LSE-Shanghai connect structure is like a cross-listing, currently with only one mainland Chinese stock traded on the UK exchange, the chairman of the FSDC said.The HKEX's decision to make its audacious bid last month was triggered when the LSE announced in August it would spend US$27 billion to acquire data company Refinitiv, which is 55 per cent owned by Blackstone Group and 45 per cent by Thomson Reuters.The HKEX offer comes with the condition that the LSE would need to give up the Refinitiv acquisition. But the LSE board said it considered the HKEX offer too low and would stick to its plan to pursue the deal with Refinitiv, to be completed in the second half of next year."If LSE would have completed the acquisition of Refinitiv, it would have enlarged its operations in the US. This would make it impossible for the HKEX to acquire the LSE as the deal would be subject to more US regulatory approval," the HKEX source said.HKEX chairwoman Laura Cha Shih May-lung said: "A combination of HKEX and LSE represents a highly compelling strategic opportunity to create a global market-infrastructure group, bringing together the largest and most significant financial centres in Asia and Europe."What Cha said was broadly true, as the two bourses bring very different strengths to the table.As IPO markets, HKEX is by far the stronger. It has beaten LSE in terms of both the number of IPOs and the amount raised over the past 10 years. Hong Kong was ranked the top IPO market worldwide six times over the past decade, while LSE has languished between third and eighth place, once slipping as low as 22nd, according to data from Dealogic.But LSE has a far more diversified business. In 2018, it generated 38 per cent of its income from post-trade services such as clearing and settlement via its 82.6 per cent-owned LCH, which clears half of the world's interest rate swaps. Forty per cent if its income comes from its information services, such as leading global index provider FTSE Russel Indexes. London Exchange strongly rejects Hong Kong's surprise takeover bidCapital markets only accounted for 13 per cent of LSE's income in 2018, in contrast to the HKEX which garnered 46 per cent of its income comes from stocks and derivatives trading."The deal is logical as HKEX and LSE are highly complementary in businesses. HKEX is strong in stocks and derivatives trading and IPO while LSE is strong in fixed income, foreign exchange and offshore US-dollar settlement centres," said Kenny Ng, Lai-yin, securities strategist at Everbright Sun Hung Kai."If I was a shareholder of HKEX, I would agree to the transaction. If I was a shareholder of LSE, I would consider further negotiations with HKEX for better returns," Ng said.HKEX offered to pay £83.61 per LSE share in cash and stock. LSE's share price shot up 16 per cent at the time of the offer. It traded at around £73.38 on Friday morning, up 7.8 per cent from before the bid. HKEX closed at HK$226 on Friday, down 8.1 per cent since announcing the offer.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.
Some shareholders of Hong Kong Exchanges and Clearing (HKEX) are opposed to the local bourse further raising its bid for London Stock Exchange, saying a higher bid would mean additional risks for them.Earlier on Friday, three shareholders of the London bourse said they could be drawn into further discussions if the HKEX raises its offer price by 20 per cent and increases the cash component."I will definitely oppose the HKEX from raising its offer for the LSE as it will become too expensive," said Christopher Cheung Wah-fung, a lawmaker for financial services sector, and an HKEX shareholder.Cheung and about 500 local brokerages received shares of HKEX when it was listed in 2000.Christopher Cheung Wah-fung, lawmaker for financial services, says that as an HKEX shareholder he opposes a higher bid for LSE. Photo: Nora Tam alt=Christopher Cheung Wah-fung, lawmaker for financial services, says that as an HKEX shareholder he opposes a higher bid for LSE. Photo: Nora TamThe HKEX will have to convince these shareholders about the merits of a higher takeover offer."The deal is full of uncertainties as we do not know if the regulators in the UK, US and Europe will approve, and we do not know if the combination of the two exchanges will work out smoothly," said Cheung, who is also the founder and chief executive of Christfund Securities. Hong Kong's bold bid for London Stock Exchange faces scrutiny of global regulators"As such, the current proposal means the HKEX shareholders have to face risks. I will certainly oppose raising the bidder higher as it would add to the risks."The HKEX on September 11 surprised the market by proposing to pay £83.61 per LSE share in cash and stock for the London bourse operator, valuing it at £29.6 billion (US$36.6 billion). It is the most expensive exchange takeover offer and could create a giant exchange that would span Asia, Europe and America.The LSE immediately rejected the unsolicited approach, saying it faced regulatory hurdles and did not make strategic sense.But the HKEX has not given up and has hired HSBC and UBS to lobby the shareholders of LSE directly. HKEX needs to make a formal offer by 5pm next Wednesday. Some LSE shareholders on Friday urged the Hong Kong bourse operator to raise the offer by 20 per cent, according to a Reuters report.Guy de Blonay, manager of the Jupiter Financial Opportunities Fund and a major LSE shareholder, said the HKEX would have to increase the per share price to between £90-100, up from the initial approach of around £83.61 for shareholders to take it seriously.De Blonay told the Post by email that he wanted to see a revised offer from HKEX."Like many shareholders, I do not feel the current offer on the table from the HKEX for the LSE fully reflects the value and future potential earnings the combined entity would likely achieve ... That said, were we to see a revised headline price and an improvement in the cash component from HKEX, that would likely catch the attention of LSE shareholders," de Blonay said.Charles Li, chief executive of HKEX, is leading the efforts to acquire LSE. Photo: Jonathan Wong alt=Charles Li, chief executive of HKEX, is leading the efforts to acquire LSE. Photo: Jonathan Wong"[HKEX chief executive] Charles Li knows this is a one-off opportunity, and I would expect him to carry on fighting," de Blonay was quoted as saying in the Reuters report.Wilfred Wong, another veteran local broker, was also opposed to the HKEX increasing the price further.Tom Chan Pak-lam, chairman of the Institute of Securities Dealers and chief executive of Success Finance Group, said it was natural to see negotiations in any deal."Our brokerage house still owns shares of HKEX. We support the HKEX to use M&A; to diversify and expand the business," Chan said.An HKEX spokesman said he had no comment on whether the bourse operator planned to raise its bid.A government spokesman declined to comment on its voting decision as a shareholder. The Hong Kong government is the largest single shareholder of the HKEX as it owns a 6 per cent stake through the Exchange Fund."The government is glad to see HKEX's endeavour to enhance its core strength and seek international expansion in accordance with its strategic plan. We do not comment on market speculation," a government spokesman replied to an email query.The HKEX-LSE takeover will also need the approval of LSE and HKEX shareholders and regulators in the UK, US, France, Italy and Europe.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.
Some London Stock Exchange investors have told Hong Kong Exchanges and Clearing (HKEX) that any bid must contain more cash and be up to 20% higher to persuade them to engage, three shareholders and a banking source close to the deal said. The three investors, who own a combined 3% of LSE, said HKEX has been lobbying them to back a potential $39 billion cash and share offer for the London exchange after it made a surprise approach last month. LSE quickly rejected HKEX's initial approach, saying it faced regulatory hurdles and did not make strategic sense.
The bosses of the Hong Kong and London stock exchanges got into a war of words on Tuesday when fate brought them together at the same event in the midst of a bitter takeover battle.Less than two weeks after the London Stock Exchange (LSE) issued a stern rebuttal of Hong Kong's unexpected US$36.6 billion bid, the two men clashed during back-to-back sessions at a financial conference in the British capital.At issue were Hong Kong's status as a financial gateway to China and whether Beijing's tight control over money leaving the country " something Hong Kong's role relies on " will soon be a thing of the past.Speaking first at the Sibos 2019 event, David Schwimmer, chief executive of the London Stock Exchange, continued where a rejection letter penned by the LSE chairman left off. He reiterated the UK exchange's preference for Shanghai over Hong Kong as a partner providing access to Chinese markets. HKEX makes US$36.6 billion surprise bid for London Stock Exchange"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 stock connect scheme allows China's domestic shares to list in the form of global deposit receipts on LSE and raise capital in international markets."We view the capital controls around the Chinese market as constantly evolving, and the trend is that they are slowly but surely being removed," Schwimmer said.Charles Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing Limited (HKEX), speaks on August 19. Photo: Jonathan Wong alt=Charles Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing Limited (HKEX), speaks on August 19. Photo: Jonathan WongBeijing's strict capital controls enable Hong Kong, which allows free flow of capital, to act as a gateway for foreign investment to enter into the mainland market.Charles Li Xiaojia, chief executive of Hong Kong Exchanges and Clearing, the operator of Asia's third-largest stock exchange, spoke immediately after Schwimmer, in a separate session at the event attended by some 8,000 delegates.He responded by dismissing his counterpart's optimism about capital controls, and reaffirmed his belief that Hong Kong can continue in its role as gateway to China."The idea China will relax controls ... we will still be talking about it for 20 years. Capital controls will be with us for our generation," Li said. Hong Kong's bold bid for LSE faces scrutiny of global regulatorsHe highlighted the fact Hong Kong's stock market has acted as a hub for Chinese companies to raise funds for far longer than London has."I wish we had patented the word 'connect' when we did it. We did that 25 years ago, today we have 500 massive Chinese companies listed in Hong Kong," he said, referring to the H-shares programme started in July 1993 for mainland companies raise funds in Hong Kong.HKEX started the Hong Kong-Shanghai stock connect in November 2014 and expanded the concept to Shenzhen two years later. The schemes allow cross-border trading of over 2,000 stocks from the three markets. HKEX's bid for London is no big deal amid a trend of consolidationsSchwimmer, on the other hand, disclosed that one Chinese company had joined the London-Shanghai connect so far, with another one "in the pipeline".China Pacific Insurance on Tuesday said it planned to list on LSE at an undisclosed time, becoming the second company listed under the connect scheme, after Huatai Securities' flotation in June.On September 11, HKEX surprised the market by making an unsolicited takeover bid for LSE, offering US$36.6 billion for the centuries-old exchange.LSE's board of directors rejected it two days later. But HKEX is not giving up and has hired investment banks UBS and HSBC to lobby shareholders of LSE to accept the offer, according to a Bloomberg report.David Schwimmer, chief executive officer of London Stock Exchange Group (centre) pictured in October last year. Photo: Bloomberg alt=David Schwimmer, chief executive officer of London Stock Exchange Group (centre) pictured in October last year. Photo: BloombergLi said at the event on Tuesday that it was the "best time" to combine with the LSE, though he recognised the improbability of the deal."If I stand in David's shoes, I will reject Charles Li," Li said, striking a humorous tone."We think it's time to think big. This is the time in our view when the world is becoming more polarised from east to west. We need to have an unrivalled global financial infrastructure across all global currencies and all time zones."London Exchange rejects Hong Kong's surprise takeover bid in strongly worded endorsement of Shanghai as 'preferred partner'If it were to go through, the HKEX-LSE deal would need approval from shareholders of both exchanges as well as regulators in the UK, the US, and Europe. The structure of HKEX, over which the Hong Kong government has a strong influence, is a key concern.Hong Kong government is the largest shareholder, with a 6 per cent stake. Half of the board is appointed by the government, while the shareholders select the rest."We have a slightly unusual governance structure. Today if this transaction is approved, we would have created a global company. The structure could have been completely different. Everything is open to discussion," Li said.Hong Kong Exchanges and Clearing's unsolicited takeover bid for the London Stock Exchange Group was met with a stern rebuttal. Photo: Paul Yeung/Bloomberg alt=Hong Kong Exchanges and Clearing's unsolicited takeover bid for the London Stock Exchange Group was met with a stern rebuttal. Photo: Paul Yeung/BloombergWhile many attempts at cooperation between American and European exchanges had failed to work, Li said the key difference was that in those cases the opportunity was not incrementally increasing."Synergy can only go so far. But here we are talking about unlocking a frontier [between London and Hong Kong]," Li said.The HKEX's unsolicited offer required LSE to give up its US$27 billion offer to buy data company Refinitiv. But Schwimmer is sticking with that deal."The Refinitiv transaction is very helpful for us in Asia in China specifically. Refinitiv is in 190 countries, it has a substantial presence in China, but also operates in many other countries. So with the transaction we will transform into a truly global market including a very strong presence in serving customers in China," he said.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.
Initial public offerings (IPOs) are returning to Hong Kong, as valuations have bottomed out after a dismal summer disrupted by the worst political crisis in the city's history, underscoring the resilience of Asia's financial hub as the go-to option for fundraising, said one of the largest local brokers.As many as 16 companies applied to raise funds on the local bourse in the first three weeks of September, increasing the number of active applications by 7 per cent to 231 in the year to date, according to data by the Hong Kong Exchanges and Clearing Limited (HKEX), the market operator. They are open to launch their IPOs, pending approvals by the HKEX."Many clients are returning to the market in September after a quiet summer," said Kenneth Ho Shiu-pong, the equity market managing director at Haitong International Securities Company, which arranged 37 IPOs worth US$1.59 billion last year, and underwrote 28 fundraising deals valued at US$704.77 million this year. "Hong Kong remains the top fundraising destination for mainland Chinese and Asian companies that want to capture the international investors."Hong Kong's economy is teetering on the brink of a technical recession, as three months of political rallies that began on June 9 have deteriorated into street mayhem and violence, causing property prices to plunge, forced visitors to stay away and crimped retail sales. Up to 10 of the city's smallest brokers have shuttered, as dwindling transactions made it too expensive for them to maintain their operations, according to the industry's association.Still, the city's benchmark Hang Seng Stock Index fell by 6.2 per cent at the worst of the crisis, recovering to a 2 per cent dip as at the end of Friday's trading. That has been worse than Hong Kong's previous political crisis during the Occupy Central movement in 2014, when the city's central business district was almost paralysed by 79 days of sit-ins and protests."Hong Kong remains the top destination for IPOs, based on its strong fundamentals, despite a number of uncertainties affecting the market's sentiment, and some IPO applicants adopting a more cautious, wait-and-see approach to proceed with their listings," said KPMG China's head of capital markets Paul Lau.SCMP Graphics alt=SCMP GraphicsBudweiser Brewing Company APAC Limited, the regional unit of the world's largest beer producer, last week revived its fundraising plan by halving the amount of capital raised to US$4.8 billion. Still, that makes it the world's second-biggest IPO this year. ESR Cayman and several other companies also dusted off their shelved plans.Gloom and doom prevailed during the summer months, when Budweiser, ESR Cayman and others shelved their IPO plans, which would have raised a combined US$11.05 billion in Hong Kong, and helped the local bourse catch up with New York and Nasdaq in the annual race to be the world's fundraising capital.The tide turned after Hong Kong's Chief Executive Carrie Lam Cheng Yuet-ngor caved in to public demand on September 4 and withdrew the controversial extradition bill that sparked the protests in the first place.SCMP Graphics alt=SCMP GraphicsBudweiser is expected to set a final price for its IPO at the end of today. Inclusive of its US$4.8 billion stock sale, Hong Kong's fundraising tally is projected at US$16 billion from 84 IPOs, putting it third globally behind New York Stock Exchange and Nasdaq, according to Refinitiv data. Hong Kong was the world's favourite fundraising destination in six of the past 10 years.There were "positive signs from the number of main board deals in the first three quarters comparable to last year, and the number of new main board applicants in July and August increased by about 30 per cent," KPMG's Lau said. "Hong Kong is likely to remain in the top three globally in terms of total funds raised for 2019."Consumer stocks, biotechnology and telecommunications remained the darlings of international investors, according to Haitong's Ho, adding that come clients " particular those with business models that are more likely to be better received in the US " would still prefer to list in New York. Haitong helped arrange Luckin Coffee's US$561 million Nasdaq IPO in May."Luckin Coffee is a Chinese version of Starbucks, so we received very strong investor demand globally, especially in the US, as expected," Ho said.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 Exchanges and Clearing Ltd said it will continue to engage with the shareholders of London Stock Exchange Group after the London bourse emphatically rejected its $39 billion takeover offer on Friday. "The Board of HKEX had hoped to enter into a constructive dialogue with the Board of LSE to discuss in detail the merits of its proposal and are disappointed that LSE has declined to properly engage," the Hong Kong Exchange said.
The London Stock Exchange has rebuffed Hong Kong's unsolicited takeover bid in a strongly worded letter and separate website post spelling out its concerns about the "fundamental flaws" of the plan, which included the current political crisis engulfing the city.The UK bourse's board of directors said it had unanimously rejected the US$36.6 billion proposal from Hong Kong Exchanges and Clearing, which surprised the market when it was announced earlier this week.In a letter to the chairman and chief executive of Hong Kong Exchanges and Clearing, LSE chairman Don Robert pulled no punches, making clear his preference for Shanghai over Hong Kong as a strategic partner."We do not believe HKEX provides us with the best long-term positioning in Asia or the best listing/ trading platform for China. We value our mutually beneficial partnership with the Shanghai Stock Exchange which is our preferred and direct channel to access the many opportunities with China," it said.He was referring to LSE's existing stock connect scheme with Shanghai Stock Exchange, which he said gives it direct access to China.A statement posted on the LSE website on Friday said: "The board has fundamental concerns about the key aspects of the conditional proposal: strategy, deliverability, form of consideration and value," said a statement posted on the LSE website on Friday, just two days after the local bourse made the unexpected offer."Accordingly, the board unanimously rejects the conditional proposal and, given its fundamental flaws, sees no merit in further engagement." HKEX makes US$36.6 billion surprise bid to take over London Stock ExchangeRobert's letter to his HKEX counterpart, Laura Cha Shih May-lung, and chief executive Charles Li Xiaojia, set out the reasons for the rejection and expressed dismay at HKEX's conduct."We were very surprised and disappointed that you decided to publish your unsolicited proposal within two days of our receiving it," Robert said in the letter, referring to the "highly conditional proposal" made in private by the HKEX on Monday.The HKEX, which operate the third-largest capital market in Asia, responded in a statement late on Friday, saying it was disappointed the LSE had "declined to properly engage"."In particular, HKEX had hoped to demonstrate why it believes that the benefits of its proposal significantly outweigh those of the proposed acquisition of Refinitiv," it said, adding that it would continue to "engage with shareholders".It revealed its shock bid on Wednesday, offering to pay £83.61 per LSE share in cash and stock for the London bourse operator, which valued it at £29.6 billion (US$36.6 billion).It was the highest ever takeover offer for a stock exchange, and included a demand that the LSE would need to give up its own US$27 billion acquisition of the financial data provider Refinitiv, announced on August 1.The LSE board said it considered the offer to be undervalued and would stick to its plan to pursue the deal with Refinitiv, which is expected to be completed in the second half of next year."We do not see strategic merit for LSEG (London Stock Exchange Group) in your proposed transaction," Robert said. "We recognise the scale of the opportunity in China and value greatly our relationships there. However, we do not believe HKEX provides us with the best long-term positioning in Asia or the best listing /trading platform for China."The rejection was also because the LSE considers HKEX shares to be "unattractive". The offer took the form of 25 per cent in cash and 75 per cent in new shares."We see the value of your share consideration as inherently uncertain. The ongoing situation in Hong Kong adds to this uncertainty," he said. The city has faced unprecedented anti-government protests since June 9 that have shaken confidence in its standing as a global financial hub."Furthermore, we question the sustainability of HKEX's position as a strategic gateway in the longer term. The Hong Kong concentration and core characteristics of your business, together with your Hong Kong domicile and listing, present an additional set of difficulties," the LSE chairman said.HKEX would have needed to get approval from a number of regulators in the UK, US, and Italy for the takeover to go ahead.The Hong Kong government is the largest shareholder in HKEX with a 6 per cent stake, and it appoints half of the board members. This would "complicate matters" and "pose a serious risk for our shareholders," Robert said.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/LONDON/NEW YORK (Reuters) - The London Stock Exchange's board will meet in coming days to decide on the Hong Kong bourse's surprise $39 billion takeover proposal, a source close to the British company said on Thursday, as the market poured cold water on the deal. The unsolicited takeover offer is not expected to succeed given a preference among LSE investors for the exchange to complete its $27 billion proposed acquisition of data and analytics group Refinitiv, the source close to the LSE said. The exchange wants to focus on executing that deal, rather than risk it being derailed by the Hong Kong bourse, the source said.
Hong Kong's financial marketplace operator faces an uphill battle to obtain regulatory approval for its unsolicited takeover bid for the London Stock Exchange (LSE), said the former chief executive of the United Kingdom's 300-year-old bourse.That is because the LCH, 82.6-per cent owned by LSE, clears half of the world's interest rate swaps, and is the second-largest clearing house for bonds and repos that serve 13 government debt markets. Founded in 1888, the LCH clears commodities, securities, exchange traded derivatives, credit default swaps, energy contracts, freight derivatives, interest rate swaps and foreign exchange.While the broad range of financial assets attracted the attention of Hong Kong Exchanges and Clearing Limited (HKEX), their geographical span also gives the regulators of France, Germany, Italy, and the US Commodity Futures Trading Commission (CFTC) the sway to weigh in on Hong Kong's bid, adding to the requisite approval by the Bank of England and the UK's Financial Conduct Authority, said the LSE's former chief executive Xavier Rolet."HKEX is taking a very ambitious and aggressive move to propose the offer, but it would not be easy," Rolet said in a telephone interview with South China Morning Post. "It is not just the UK, but the HKEX will need to get approval from the US and many other regulators on the takeover the LSE."Xavier Rolet, chief executive officer of the London Stock Exchange Group from 2009 to 2017, during an interview at the LSE on 15 November, 2016. Photo: Enoch Yiu alt=Xavier Rolet, chief executive officer of the London Stock Exchange Group from 2009 to 2017, during an interview at the LSE on 15 November, 2016. Photo: Enoch YiuThe potential role by the additional regulators, particularly amid heightened tensions between the United States and China, could complicate the lengthy approvals process needed for the HKEX's US$36.6 billion bid.In a surprise announcement yesterday, the Hong Kong bourse offered to pay £83.61 per LSE share in cash and stock to buy the London exchange for £29.6 billion (US$36.6 billion), making it one of the most ambitious acquisitions among the world's exchanges. Shareholders of the London bourse would need to vote down their own US$27 billion take over of the Refinitiv financial data service for the Hong Kong offer to proceed.HKEX Chief Executive Charles Li Xiaojia during a press conference on 16 July 2019. Photo: Nora Tam alt=HKEX Chief Executive Charles Li Xiaojia during a press conference on 16 July 2019. Photo: Nora TamThe LCH's website shows regular filing to the CFTC, which has an agreement with the Bank of England to regulate the clearing house.The Trump administration, which has been fighting a year-long trade war with China, has also stepped up the scrutiny of Chinese corporate investments and acquisitions in America, through the Committee on Foreign Investment in the United States (CFIUS). US allies around the world have also raised their bars on Chinese investments and corporate action.In this global environment, a bid by Hong Kong - the special administrative region of China - would be subject to the same heightened scrutiny as Chinese corporate entities, analysts said.Hong Kong's government, while owning only 6 per cent of HKEX's shares, appoints half of the exchange's board members, while the remainder half are approved by shareholders. The chairperson of the exchange - currently held by former Securities and Futures Commission's Deputy Chairman Laura Cha Shih May-lung - needs the approval of the city's Chief Executive.HKEX shares declined by 3.5 per cent on Thursday, giving back the previous day's 0.3 per cent gain after the exchange operator announced its bid. LSE shares traded at £72.1 in early trading on Thursday, after soaring by as much as 16 per cent to £79.22 after receiving the bid."HKEX's offer is more likely to face regulatory challenges versus LSE's proposed Refinitiv acquisition," said Christian Kuendig, Senior Director of EMEA Non-Bank Financial Institutions at Fitch Ratings in an emailed note. "Global regulatory authorities are increasingly concerned about competition in the FMI [financial market infrastructure] space, blocking some major mergers and acquisitions, including the proposed merger between LSE and Deutsche Boerse in 2017, while triggering divestitures related to other acquisitions, such as the sale of Trayport by ICE to TMX Group in 2017. Increasing control by Chinese authorities over Hong Kong could also raise UK and US regulators' concerns about data and information security."SCMP Graphics alt=SCMP GraphicsThe London exchange, established in 1698, is a venerable institution that the UK government is unlikely to allow to fall into foreign hands, according to British media reports. For its part, the UK government said it would scrutinise the offer closely."The London Stock Exchange is a critically important part of the UK financial system, so as you would expect, the government and the regulators will be looking at the details closely," a UK government spokesman said in response to query by the Post. "We cannot comment further on commercial matters."Rolet, who served as the LSE's chief executive from 2009 until his retirement in 2017, carried out 25 successful acquisitions during his tenure, including the 2013 purchase of the LCH and the 2011 takeover of the FTSE Group's indices and data businesses. Those deals boosted the LSE group's value by 18-fold from £800 million to £14 billion.The deal will require the shareholders of LSE to vote down its owns US$27 billion to take over data company Refinitiv which it announced on August 1, which Rolet said to make it harder for LSE shareholders to accept the offer."The share price of the London Stock Exchange is trading below the HKEX offer price, which showed investors are sceptical on whether it can get approvals by the regulators," Rolet said.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.