Hong Kong Stock Exchange Aims to Merge With London

Bull sculptures and flags flying outside Exchange Square of Hong Kong Exchange Stock (Source: Robert Cicchetti / Shutterstock.com)

The Hong Kong Stock Exchange has made a bold proposal to acquire the London Stock Exchange in a deal worth $36.6 billion, according to a HKEX statement on Wednesday. HKEX Chief Executive Officer Charles Li said the they were considering an ‘ambitious and far-reaching’ deal for many months. Meanwhile the LSE just recently wrapped up the acquisition of data provider Refinitiv for a head-turning $27 billion.

Li made further comments on the strategic value of the deal. He talked about how the deal will enhance the internationalization of the Hong Kong Exchange. Instead of being merely an entry point to the Chinese market, Li believes that this deal will augment the international influence of the HKEX and raise its global profile.

With regard to mainland China, Li says that the deal could accelerate China’s access to the global financial markets, giving Asia’s largest economy more unfettered access to international financial products. To further the deals value to the mainland China, Li also pointed to the gradual internationalization of the Chinese yuan as an opportunity that could be enhanced by the completion of the merger with the LSE.

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Li also said that for the UK, the combined exchange would elevate London’s prominence as a global financial center. He cited London’s decision to begin trading European dollars in the 1960s as crucial to the city’s rise as an international financial hub, comparing it to the potential to trade in RMB as the Chinese yuan increases its influence as a major international currency.

The deal is likely to face intense scrutiny from UK regulators, given the scale and importance of the potential agreement.