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H AY L E Y
M C D O W E L L ]
Hayley’s
Comment
A
Charles Li’s compelling case for
HKEX’s acquisition of LSEG
s Charles Li, the
chief executive of
Hong Kong Ex-
changes & Clearing
(HKEX), took the
stage at the Sibos conference in
September for a highly-anticipat-
ed keynote interview, I wasn’t sure
what to expect, or if the topic of
HKEX’s unsolicited bid to acquire
the London Stock Exchange
Group (LSEG) would even be
discussed. It would, in fact, be the
main talking point.
Li took a seat on the main stage
immediately after LSEG chief
executive David Schwimmer’s
keynote interview, during which
he stated that LSEG was betting
on Shanghai as the long-term
financial centre in Asia, not Hong
Kong. As Schwimmer very much
avoided in-depth discussion of
the proposed merger, Li took his
chance to make the case for the
deal.
“We think now is the time to
think big,” Li said. “Everybody is
trying to retrench and think inter-
nally. As the world becomes more
polarised between the East and
the West, we need to have a global
98 // TheTrade // Fall 2019
market infrastructure to underpin
those two centres of gravity. Our
idea for the transaction is a very
simple vision, but it’s a big dream.
We would create a global infra-
structure that is unrivalled across
asset classes, across currencies
and across time zones. Together,
we complete each other.”
He acknowledged the fact that
HKEX has been eyeing up LSEG
for quite some time, and that
Brexit had created uncertainties
that the exchange group could
probably live without. But as 31
March came and went, and the
new withdrawal deadline was
confirmed for 31 October, HKEX
realised that the decision to prop-
osition LSEG was fast-becoming
a ‘now or never’ scenario. Add the
LSEG’s impending $27 billion ac-
quisition of Refinitiv into the mix,
Li said that it was obvious that
the time to propose such a merger
would never be right. But Brexit
presents further opportunities for
LSEG and the UK’s capital in the
form of the HKEX transaction.
In a post-Brexit world, as
London repositions itself in the
financial world, a HKEX tie-up
would present much more to other
global financial centres, including
the US, which the UK is already
intrinsically connected to. Li de-
clared the UK’s ‘bargaining power’
in the global financial ecosystem,
in the form of its alignment with
Asia through HKEX, will some-
how structure the polarised world
that we are living in.
Despite other attempts that have
failed to capture the ‘network ef-
fect’ so to speak (whether that be
NYSE/Euronext or LSEG/TMX),
the HKEX proposition became
somewhat more compelling fol-
lowing Li’s interview that morning
in September. And although
HKEX’s chief was quick to point
out the timing to propose the
merger was wrong, the political
and economic landscape markets
are challenged with today made
me question whether it is, in fact,
exactly the right time for a HKEX/
LSEG tie-up.
What are your thoughts on the bid? Tweet to Hayley - @hayley_mcdowell