Hong Kong Exchange and Clearing stocks fell on Thursday as investors questioned the surprising move by the Hong Kong Index and Clearing (HKEX) stock company to make a bid for the London Stock Exchange (LSE). HKEX has also been deemed to be weighing down the Hang Seng Index, seen currently as the ‘biggest loser’ of the Hong Kong stock market as a result.
The offer was made this Wednesday, with HKEX proposed to combine the two stock companies for £31.6 Billion including debt. This move will merge the two important trading hubs in the world. In addition, the move itself would be the largest foreign takeover of a UK-listed company, formerly accomplished by a Japanese pharmaceutical company Takeda (TAK) acquiring UK-based BioTech company Shire in 2018.
HKEX has emphasized that the move was merely an offer rather than a sure bid. Charles Li, CEO of HKEX stated that the move “will redefine global capital markets for decades to come”. He described the move as a “corporate tale of Romeo and Juliet”. Indeed, the move to conjoin the two stock market companies will establish a stock market giant that could rival the New York Stock Exchange and NASDAQ, the top two stock market companies in the whole world. In addition, this move has been described as a means to further connect Asia (especially Mainland China) and Europe.
However, there are complications arising from this decision. Both Hong Kong and the UK are facing political upheavals, with the UK is facing the issue of Brexit and Hong Kong facing political instability due to ongoing protests. In addition, some might further question Hong Kong’s intention amid China’s strengthening hold over the region.
In addition, LSE has been looking for opportunities to expand as of late, having plans to buy the Financial data analysis company Refinitiv for $27 Billion in order to provide a place where brokers can find out information surrounding Financial and data analytics. Due to this, they may be unlikely to approve of the idea of being bought by HKEX.