The TRADE 61 - Q3 2019 | Page 98

[ F I N A L T H O U G H T S | 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