Hong Kong Exchanges and Clearing wants to buy the London Metal Exchange in order to diversify its business, but analysts question how the acquisition will really help the city develop its own commodities trading.
SCMP, June 5
Someone has asked the right questions at last. Just how indeed will buying the LME help develop commodities trading here? And why should we bother anyway in a city that has no credentials in commodities? Just what is HKEx boss Charles Li Xiaojia up to here? This is a head-scratcher.
But look at it from a different angle and it starts to make sense.
We begin with the fact that HKEx is a branch of the Hong Kong civil service and has been since the government forced four previous stock exchanges to unify in 1986. The government still has the majority of votes and uses them to get the 'independent' directors it wants.
Then take account of the fact that the big listings on the exchange are all mainland ones now. This is a Hong Kong exchange only because the trading floor (little used these days) is located in Hong Kong and because 500 or so local 'market participants' continue to have the right to front-run real investors.
Next, bear in mind the troubles Beijing has had in making foreign investments. It has built up a foreign reserve cash hoard of US$3.3 trillion and every time it tries to buy something worthwhile with the money, rather than just parking it in United States government war debt, the warning bells start ringing.