Hong Kong Exchange Shares Dip on Political Risks
The shares of the Hong Kong exchange on Thursday dropped as much as 3%. And this came as investors cast doubt on the merits of its $39 billion takeover approach to London Stock Exchange Plc. Also, this agreement will make a global financial giant.
The approach became public following the closing on the city’s markets on Wednesday. And it received cool feedback in London. The LSE shares closed by rising 5.9%, far short of the premium indicated by the indicative offer from Hong Kong Exchanges and Clearing Ltd.
On the other hand, HKEX shares fell 3.4% as the afternoon session got underway. It also underperformed the blue-chip Hang Seng Index, which was off by 0.18%.
In the proposed deal, they wanted to create an exchange powerhouse spanning Asia and Europe. As a result, this is a better competition with its U.S. rivals like the Intercontinental Exchange Inc. and CME Group Inc. However, tough political and technical challenges have already mounted.
HKEX Deal
Moreover, the deal with HKEX leaves LSE with no choice but to abandon a $27 billion acquisition. It bought the financial information provider Refinitiv from U.S. private equity firm Blackstone Group Inc., and Thomson Reuters Corporation. Thomson Reuters is the parent of Reuters News.
Then, this deal went public in late July. And this caused LSE’s shares to go up to as high as 15%. On Wednesday, LSE stated that it remained committed to the Refinitiv deal.
In addition to that, the approach by the HKEX came amid the fourth month of Hong Kong’s sometimes violent political protest. And the legislation that would have drawn the former British colony closer to the Chinese legal system fueled this.
Furthermore, how the government handled the situation has been criticized internationally. And also, it is facing political pressure applied by Beijing to Hong Kong companies not to support the pro-democracy movement. For one, Cathay Pacific received an order to suspend staffs who got involved in or supported the demonstrations.
