Editorial | Hong Kong exchange must look beyond the failure of London deal

Hong Kong’s decision not to go ahead with a takeover bid for the London Stock Exchange (LSE) is disappointing, but inevitable. The US$36.6 billion offer was considered by the British bourse to be insufficient, several shareholders reportedly wanting the amount raised by 20 per cent.

That would have been excessive and the risks involved too high, so the proposal has been dropped. But that does not mean visions of the city becoming a global financial centre should be given up; the way forward for the local exchange obviously still lies in its expansion and diversification.

The cash-and-stock offer was the highest-ever bid for an exchange and audacious given the political climate in both Hong Kong and Britain. It was dependent on the LSE dropping its US$27 billion attempt to buy the financial data provider Refinitiv.

But raising the outlay would have meant increased borrowing for Hong Kong Exchanges and Clearing (HKEX), heightening risks amid the gloomy outlook for the local, Chinese and global economies. Even if British shareholders were won over, though, political and regulatory hurdles would still have had to be surmounted.

But the LSE’s rejection of the bid two days after it was made on September 11, the expectations of shareholders and the regulatory challenges have not deterred HKEX. It said yesterday that it continued to believe that a tie-up of the two exchanges would be “strategically compelling and would create a world-leading market infrastructure group”.