Anthony Rowley

The London Stock Exchange was wrong to reject Hong Kong’s US$36.6 billion offer. It needs to think bigger or risk being left behind

In rebuffing HKEX’s bid, the London Stock Exchange has failed to consider the role it could play as a funding centre for China’s belt and road. If Brexit happens and its position is diminished as a result, attitudes may well change

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The London Stock Exchange should think big and capitalise on its leading position as a centre for offshore yuan trading. Photo: EPA

Anthony Rowley

Published: 1:00am, 16 Sep 2019Updated: 1:07am, 16 Sep 2019

The London Stock Exchange risks wishing itself into the wilderness with its hasty decision to reject a US$36.6 billion acquisition bid from the Hong Kong stock exchange.

Hong Kong Exchanges and Clearing’s offer gave London the opportunity to cement its position as a centre for financing China's massive Belt and Road Initiative. Instead, that position could now go to a European financial centre.

The LSE’s rejection came remarkably quickly, within days of HKEX’s surprise offer, and suggested politics had trumped economic, financial and logistical considerations. The rebuff was not unexpected, given recent political instability in Hong Kong and the view in London that HKEX is a Trojan horse from Beijing.

But HKEX has vowed to press on with its bid and is holding shareholders’ meetings. The LSE said in a statement on Friday that it “unanimously rejects the conditional proposal and, given its fundamental flaws, sees no merit in further engagement”. But attitudes are likely to change if Brexit goes ahead and London finds its role as a global financial centre diminished.

The LSE, along with British financial regulators, should have taken a leaf out of former New Zealand prime minister Robert Muldoon's book and learned to “think big”. They should have seen HKEX’s bid as a make-or-break opportunity for both London and Hong Kong.

HKEX’s offer was bold and farsighted when seen in the context of the Belt and Road Initiative, which aims to link Asia with Europe. As Kent Calder, director of the Reischauer Centre for East Asian Studies at Johns Hopkins, has noted, Hong Kong and London are natural funding centres for the Chinese trade strategy.