Editorial | HKEX needs to stress in takeover bid that city still has the edge

Even if it sinks without a trace, Hong Kong’s takeover bid for the London Stock Exchange (LSE) will not be quickly forgotten. Rarely has an unsolicited offer taken everyone by such surprise, or been so abruptly and scornfully dismissed. The US$36.6 billion bid by Hong Kong Exchanges and Clearing (HKEX) may have been audacious, and the timing certainly problematic, with both places mired in political turmoil. But HKEX was getting in ahead of the LSE’s own proposed US$27 billion takeover of financial data provider Refinitiv announced on August 1.

The Hong Kong government, HKEX’s second-largest shareholder, would no doubt have welcomed an injection of some unexpected and uplifting good news into the endless cycle of violence that has undermined peaceful mass protests. However, when HKEX decided to publish its unsolicited proposal within two days of the LSE first receiving news of it, LSE chairman Don Robert was prompted to express disappointment in a letter rejecting the offer. Not only was it dismissive but humiliatingly so, with a veiled reference to the damage wrought to confidence in Hong Kong’s standing as a global finance hub by anti-government protests.

In a rebuff to HKEX’s perceived strengths, Robert said the LSE did not believe Hong Kong offered the best long-term positioning in Asia or the best listing/trading platform for China, and that Shanghai was the LSE’s preferred and direct channel to access opportunities in China.

That said, the letter raised some serious questions for HKEX about its status and future role. Hong Kong used to speak of itself as a “super connector” between the West and China. If the letter is any indication, it is a role that is diminishing rather than expanding, with added momentum thanks to the protests.

But Hong Kong need not give up on its vision as a global financial centre. This newspaper noted when the bid was revealed that it had to clear political hurdles as well as win shareholder and regulatory approvals. However, the city retains its attractions of the rule of law under an independent judiciary and open and transparent markets. Its proposal highlighted two factors involved in the consolidation of the world’s stock markets – access to data and technology as well as to the mainland’s stock markets. HKEX is now reaching out to LSE shareholders. But it needs to be clear about Hong Kong’s edge and how to position itself.