The Hong Kong Exchanges and Clearing Ltd. has shocked markets after offering to purchase the London Stock Exchange Group Plc for £29.6bn.
“Bringing HKEX and LSEG together will redefine global capital markets for decades to come,” HKEX CEO Charles Li said in a statement on Wednesday, adding that both exchanges had "great brands, financial strength and proven growth track records”.
Mr Li said that the acquisition would "connect East and West" and offer customers "greater innovation, risk management and trading opportunities".
He added: "A combined group will be strongly placed to benefit from the dynamic and evolving macroeconomic landscape, whilst enhancing the long-term resilience and relevance of London and Hong Kong as global financial centres.
Hong Kong Exchange proposes £30 billion takeover for London Stock Exchange. Hold on to your hats.... pic.twitter.com/kNCy9k6seM
— Peter Thal Larsen (@peter_tl) September 11, 2019
Following the news, LSE shares have jumped around 9pc.
The HKEX said that both exchanges were "two of the world's premier market infrastructure businesses" which, when combined, would help "enhance and capture global capital and data flows".
A HKEX spokesperson said: "The proposed combination would strengthen both businesses, better position them to innovate across markets and geographies, and offer market participants and investors unprecedented global market connectivity.
HKEX also intends to apply for secondary listings of shares on the London Stock Exchange in what has been seen as a 'commitment to the UK' amid political turmoil with Beijing.
At the time of the announcement, UK business secretary Andrea Leadsom had been speaking on Bloomberg TV and said that whilst the UK welcomed foreign investment, it would “look very carefully at anything that had security implications for the UK”.
Further Implications for Mainland China
According to Mr Li, Hong Kong's potential partnership with the LSE would "strengthen ties between the Uk and China," namely in economic and trade terms and ultimately benefitting Mainland China, Hong Kong, and the United Kingdom.
HKEX has just announced its possible offer for London Stock Exchange Group. Read more about the announcement and the thoughts of Chief Executive Charles Li in his latest blog post. https://t.co/5tLxLbdSC8 pic.twitter.com/PwFb7WDFED
— HKEX 香港交易所 (@HKEXGroup) September 11, 2019
Doing so would benefit Beijing by providing additional market support for internationalising the Yuan and opening its capital markets to foreign investment, as well as offering "interconnections" for stocks, bonds, indices and others, giving the Mainland further access to global financial infrastructure.
The proposal was also a "vote of confidence in London and the United Kingdom's future role as a global financial centre," allowing the City to strengthen its position and benefit from markets across Asia, as well as boosting the Yuan's position as a major global reserve currency, Mr Li added.
