Features

The battle for the London Stock Exchange

The Hong Kong stockmarket is muscling in on a tie-up between the London Stock Exchange and data provider Refinitiv. It is set to fail, says Matthew Partridge.

Protesters in Hong Kong © Getty Images
Political turmoil in Hong Kong bodes ill for its bid

Last week's takeover bid from Hong Kong Exchanges and Clearing (HKEX) for the London Stock Exchange (LSE) was met with a "withering rejection", notes Christopher Williams in The Sunday Telegraph. The LSE called HKEX's plans "simply not credible". Regulators aren't too happy about the deal either, with the Financial Conduct Authority making it clear that the proposed deal "would face tough regulatory hurdles, both in Britain and abroad". The deal comes as the LSE is in the process of negotiating a "landmark" tie-up with Refinitiv, the former Thomson Reuters trading terminals business.

"It is not hard to see why" regulators around the world are going to have "major problems" with this deal, says Jeremy Warner in The Daily Telegraph. The LSE's clearing business, with its "commanding" market share in a range of assets, means that it performs a "super-systematic" role in the financial system. While Hong Kong's government only owns 6% of HKEX, the former colony's chief executive has an "absolute" grip on the company since she "effectively appoints both the chairman and the chief executive" as well as half the board". Even in "more clement times", such political control would make this bid "extraordinarily problematic".

Refinitiv looks a much better bet

The Refinitiv takeover could improve the quality of the services that the LSE provides to its customers, adds Patrick Hosking in The Times. These include "more data and more analytical tools", allowing capital to be allocated more efficiently, as well as the creation of more indices that enable investors to tailor their portfolios to their own circumstances. And some of the £575m of synergies expected by the LSE could be "passed on to customers in lower prices".

Whatever happens to the two bids, the LSE is facing some longer-term problems, says Kate Burgess in the Financial Times. This includes the "sluggish" market in initial public offerings and a "precipitous" fall in follow-on funding (secondary offerings of shares) which have fallen from £13.45bn in the first half of 2018 to £8.8bn in the same period this year. This is partly due to "uncertainty over global growth... and Brexit" but it also reflects a long-term shift away from public markets spurred by increased regulation and "ample" private capital.

Recommended

Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021
A beginner’s guide to inflation
Inflation

A beginner’s guide to inflation

One of the most frequently mentioned topics in the news these days is inflation. But what exactly is inflation and how does it affect the economy and …
18 Jan 2021
Five online retail stocks to diversify your portfolio with
Share tips

Five online retail stocks to diversify your portfolio with

Professional investor Tancredi Cordero, founder and CEO of Kuros Associates, selects five of his favourite online retail stocks to buy now.
18 Jan 2021
Why investment forecasting is futile
Investment gurus

Why investment forecasting is futile

Every year events prove that forecasting is futile and 2020 was no exception, says Bill Miller, chairman and chief investment officer of Miller Value …
18 Jan 2021

Most Popular

Bitcoin: fool’s gold or the new gold?
Bitcoin

Bitcoin: fool’s gold or the new gold?

With bitcoin hitting new highs last week, and close to becoming a mainstream investment, is it really gold for the 21st century?
15 Jan 2021
The MoneyWeek Podcast: bitcoin special
Bitcoin

The MoneyWeek Podcast: bitcoin special

Merryn talks to bitcoin experts Dominic Frisby and Charlie Morris to get the lowdown on the cryptocurrency to find out why it's such a huge global phe…
15 Jan 2021
Leasehold reforms promise the end of a nightmare for many homeowners
Property

Leasehold reforms promise the end of a nightmare for many homeowners

Horror stories about unscrupulous landlords profiting from a legal relic of the feudal era are about to get a happy ending, says Simon Wilson.
16 Jan 2021