HKEX tumbles after bid

Business | Bloomberg and Stella Zhai 13 Sep 2019

The Hong Kong Exchanges and Clearing (0388) plan to take over London Stock Exchange Group is running into multiple obstacles less than 24 hours after the surprise bid was launched, with the UK bourse leaning toward rejecting the offer in its current form.

The LSE and its advisers have wide-ranging concerns, including the possible influence of China on the HKEX, and the deal could face pushback from UK and US officials over security concerns, sources said.

The LSE is also wary of a bid that is structured mainly in stock and has exposure to the volatile situation in Hong Kong, they said.

The bid also faces skepticism from LSE's British-based shareholders. Jupiter Asset Management and Aberdeen Standard Investments indicated they prefer the British bourse's planned takeover of Refinitiv - a strategic move to expand in data that HKEX wants to scrap.

"Skepticism abounds around the likelihood of the UK regulator approving this deal," said Guy de Blonay, a fund manager at Jupiter, which holds about 0.7 percent of LSE's equity. "There's also an uncertain appetite to receive HKEX paper. At this stage, there is arguably greater long-term value in the Refinitiv deal than in the HKEX proposal," said Blonay.

Shares of HKEX fell 3.5 percent to HK$237.4 yesterday, as investors cast doubt on the merits of the bid.

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