Abu Dhabi, UAETuesday 12 November 2019

HKEX boss ‘thinking big’ with $39bn bid but LSE chief commits to Refinitiv

Charles Li committed to LSE bid even if it means ‘losing face’

London Stock Exchange's chief executive David Schwimmer told the SIBOS conference in London that it would continue to pursue its $27bn merger with Refinitiv, as opposed to negotiating with the Hong Kong Exchange over its £31.6bn bid. AFP.
London Stock Exchange's chief executive David Schwimmer told the SIBOS conference in London that it would continue to pursue its $27bn merger with Refinitiv, as opposed to negotiating with the Hong Kong Exchange over its £31.6bn bid. AFP.

The chief executive of Hong Kong Exchanges and Clearing Limited (HKEX) on Tuesday said it plans to build “an unrivalled global market infrastructure group” across all asset classes, currencies and time zones despite its £31.6 billion (Dh144.8bn) bid for the London Stock Exchange being rebuffed earlier this month.

Speaking at a conference in London on Tuesday, Charles Li said that HKEX fully intends to pursue the deal, even if “it meant losing face”.

“Now is the time to think big. When the world is polarising to the east and west, it is time to become global,” Mr Li told the SIBOS conference.

HKEX believes its bid will offer it a stronger trading overlap with Europe and leverage LSE’s relationship with the US stock markets, as well as offering the London market improved access to Asia.

Meanwhile, on an earlier panel at the same conference LSE chief executive David Schwimmer again dismissed the deal and said it would continue its own $27bn (Dh99.2bn) purchase of data and analytics company Refinitiv — a deal HKEX wants it to abandon under the terms of its offer.

The two leaders of the stock exchanges had contrasting views on the Chinese economy, especially in relation to the proposed takeover.

Mr Li said that the mainland was unlikely to relax capital restrictions anytime soon, meaning Hong Kong would remain an important conduit for global investors looking for exposure to Chinese equities.

“The idea that China will one day relax its capital control — we've been talking about it for 20 years,” said Mr Li. “We're going to talk about it for another 20 years because China today, they're great with their money, they’re great carriers of their domestic economy and financial affairs, but they are fundamentally having a big challenge of dealing with the outside [world], simply because they don't want to give up their standards.”

He added that China wants foreign funds, but only if they are prepared to comply with strict financial regulations, making it harder for remote investors to take part in its capital markets.

“There are large corporate customers and investors who have a real interest in China but are not willing to go that extra mile,” Mr Li said.

Mr Schwimmer, however, said that capital constraints around mainland China were being “slowly but surely removed”,

For instance, he hailed the Shanghai-London Stock Connect initiative launched in June, which allows Chinese A shares to list on the LSE via global depositary receipts, making it easier to raise capital outside China.

Although only one company has listed so far, another is in the pipeline, Mr Schwimmer said.

“We have invested for years in our relationship directly with Shanghai. The London-Shanghai Stock Connect has been in the works since 2015,” he said.

He also dismissed the idea of Hong Kong being China’s financial hub, in what appeared to be a swipe at Mr Li’s proposed takeover.

When asked to compare the HKEX and the Shanghai Stock Exchange, Mr Schwimmer said: “For the long-term, the financial centre for China? We view Shanghai as the financial centre for China.”

Mr Schwimmer also said the Refinitiv deal would give LSE a significant foothold in the Chinese market.

“The Refinitiv transaction is very helpful for us in Asia. In China specifically, but in Asia broadly. Refinitiv has a substantial presence in China itself, I believe over 1,000 people. It also operates in many other countries in Asia.”

He said that Refinitiv deal “truly globalises” the London Stock Exchange Group.

“Much of our business is focused on Europe and with the Refinitiv transaction, we will transform into being a truly global company diversified across the Americas, Europe and Asia, including a very strong presence serving customers in China as well.”

Updated: September 24, 2019 08:44 PM

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