Hong Kong Exchange Amid Investors’ Doubt

Hong Kong Exchange shares fell on Thursday to more than 3%. At the same time, investors doubted the merits of its $39 billion takeover approach to the London Stock Exchange. And this deal will create a global financial giant.

In London, the approach received a cool response. And LSE shares closed up 5.9%, far short of the premium implied by Hong Kong Exchanges Cleaning’s indicative offer. Then, HKEX shares dipped 3.4% as the afternoon trading session got underway. And Hang Seng Index slipped by 0.18%.

The proposed deal serves as a stepping stone into creating an exchange powerhouse spanning Asia and Europe. And this might be able to catch up with U.S. competitors such as CME Group and Intercontinental Exchange.

Moreover, the HKEX deal will force LSE to leave behind a $27 billion purchase of financial information provider Refinitiv from U.S. private equity company Blackstone Group and Thomson Reuters.

In addition to that, the deal made LSE’s shares to go up as much as 15%.

HKEX

According to an analyst, the perception of Beijing’s growing influence over Hong Kong might become a key sticking point. And it is because of the close relationship of the government with the HKEX.

Aside from that, the Hong Kong government has at least a 6% stake in the HKEX. It approves six of the 13 board members. Also, it has the power to stop any other shareholding rising over 5%.

Independent analyst David Blennerhassett stated, “The transaction will require various regulatory approvals.” And he said that it would stress-test the knowledge of the world about Hong Kong’s ‘one country, two systems’ constitution.

Meanwhile, the share price of HKEX dropped mirrored investors’ worries regarding the dilutive impact of the cash-and-shares offer.

Morningstar analyst Michael Wu stated, “If the market thought the deal was going to go ahead, I would have expected the shares to have fallen by more than 3%.”