The View | China should ‘prompt’ HKEX to buy the London Stock Exchange
If China is going to play a leading role in this century then this acquisition and a good trade deal with the UK will cement its dominance of capital markets
He who can prevail in chaos is God. A historical opportunity exists for China to change the balance of power in global economics and financial markets by prevailing amid chaos through a key acquisition and trade deal.
Brexit is the beginning of the end for the European Union. Britain intends to invoke Article 50 later this month, hurtling EU members towards a complex, uncertain and acrimonious set of negotiations. Britain should expect new trade and investment terms that are almost punitive. This is especially true in financial services where passporting privileges for banks and asset managers remain uncertain.
The future of the London Stock Exchange as a leading global bourse, and London itself as a leading global capital market, is under threat
UK banks will have to bear the onerous cost of opening new headquarters, legal structures and representative offices in Paris, Frankfurt, Luxembourg and other EU cities where they wish to do business. The future of the London Stock Exchange (LSE) as a leading global bourse, and London itself as a leading global capital market, is under threat.
In two strategic moves, China can seize the agenda for trade with the UK and the EU while taking a dominant role in global capital markets. Beijing should prompt HKEX (Hong Kong Exchanges and Clearing), the owner of Hong Kong’s stock exchange, to acquire the LSE. HKEX already owns the London Metals Exchange, which has turned out to be an overpriced acquisition and not the market game changer they hoped.
HKEX management is too inward looking and timid. Instead of making bold moves, it insists on chasing yesterday’s business. Like desperately seeking the next big Chinese tech listing when the tech wave is receding or degrading their listing standards by developing a third board for even weaker candidates that will surely lead to a corporate governance killing field.
The much vaunted “stock connects” to Shanghai and Shenzhen resulted in an orgy of posturing and pyrotechnics, but little actual capital market progress that changes the financial world. HKEX managers like their high-walled comfort zone with little competition and minimal interaction with the media.
If China is going to play a leading role in this century then this acquisition and trade deal will cement its dominance of capital markets
