Shanghai, Shenzhen bourses acquire 25pc stake in Dhaka Stock Exchange

Bangladesh officials approve strategic asset purchase by Shanghai, Shenzhen exchanges

PUBLISHED : Tuesday, 20 February, 2018, 9:48pm
UPDATED : Wednesday, 21 February, 2018, 12:27am

The Shanghai and Shenzhen stock exchanges have successfully completed their first overseas acquisition, after securing a 25 per cent stake of the Dhaka Stock Exchange, according to a Bangladesh official on Tuesday.  

Bangladesh approved the joint bid from the Chinese consortium after it rejected a rival bid from India’s National Stock Exchange that raised political sensitivities, accord to an AFP report. 

China’s Shanghai and Shenzhen stock exchanges made a joint bid worth US$122 million, in addition to technical support worth a further US$37 million. 

The Shanghai Stock Exchange is the world’s fourth-largest market globally in terms of market capitalisation. The bourse has about 1,400 listed companies with a combined market value of US$5 trillion, which is the second largest in Asia after the Tokyo Stock Exchange. Shenzhen ranks No 8 worldwide with 2,100 listed companies and a market capitalisation of US$3.69 trillion, according to the World Federation of Exchange.

The Dhaka Stock Exchange has a total market capitalisation of US$40 billion. 

Hong Kong stockbrokers said the deal made strategic sense for the two mainland Chinese bourses.

“As the Shanghai and Shenzhen stock exchanges have grown into the world’s largest exchanges worldwide in recent years, it made sense for them to expand into overseas exchanges by way of acquisition,” said Gary Cheung, chairman of the Hong Kong Securities Association.

Cheung said in spite of its relatively small size, the Dhaka Stock Exchange had the potential to play an important role underscored by the close relationship between Bangladesh and China.

“There are many mainland factories moving their production lines to Bangladesh due to its low labour costs. The economy of Bangladesh may be small but its economic ties with mainland China are close. The country is also on the route of the Belt and Road Initiative. Therefore it makes sense for the Shanghai and Shenzhen Stock Exchanges to invest in its stock exchange,” Cheung said.

Cheung said the investment may pave the way for further cooperation between HKEX and other overseas exchanges.

“The investment in the Dhaka Stock Exchange may not be very big, but strategically it is a good move. The Shanghai and Shenzhen Stock Exchanges as well as the Hong Kong Exchanges and Clearing (HKEX) may well have more overseas acquisitions in future to expand their business,” Cheung said.

In 2012 the HKEX acquired the London Metal Exchange in an effort to expand into commodities trading.

The Dhaka Stock Exchange on February 10 approved the Chinese offer to buy a quarter of the bourse’s 1.8 billion shares, but Bangladesh’s financial regulator asked it to “further scrutinise” the decision, the AFP reported on Tuesday.

“The board has reconfirmed its decision about approving the Chinese consortium’s bid as it is higher than its nearest competitor’s,” said stock exchange spokesman Shafiqur Rahman after the meeting on Monday evening. 

The Mumbai-based National Stock Exchange had offered 15 taka (US$0.18) per share during the tender process, compared to 22 taka per share offered by the Chinese consortium. 

Chinese President Xi Jinping in October 2016 became the first Chinese head of state to visit Bangladesh in more than three decades, signing deals worth more than US$20 billion. But there have been setbacks, with Bangladesh last month blacklisting a top Chinese construction firm for allegedly trying to bribe a senior government official.