Hong Kong stock exchange proposes surprise £32bn merger with LSE – as it happened
Rolling coverage of the latest economic and financial news
- Breaking: Hong Kong wants to take over London stock exchange
- Proposal values LSE at 32bn
- Deal would supplant LSE's merger with Refinitiv
- Expert: It's not going to happen
Earlier:
4.47pm BST
Finally, the FTSE 100 index has closed 70 points higher at 7,338, up almost 1%.
The London Stock Exchange led the rally, gaining almost 6% to 72.06..
China said it will not impose additional tariffs on 16 US products, and this conciliatory move should help the trading relationship between Washington DC and Beijing.
Tomorrow, the ECB will hold their much awaited meeting, and the chatter about an interest rate cut, and possibly the announcement of a bond buying scheme too has encouraged the buying of equities.
4.22pm BST
Nathan Flanders, Global Head of Non-Bank Financial Institutions at Fitch Ratings, thinks a Hong Kong Exchange-London Stock Exchange merger could make sense:
It could come with near-term integration and deleveraging risks, but would result in more highly diversified platforms over the longer-term, better positioned to compete in an increasingly consolidated industry where scale and data are expected to drive outperformance."
3.14pm BST
Over in Canary Wharf, a small army of celebrities have been trading stocks, shares, swaps and currencies today, to raise funds for charity.
It's the 15th annual BGC Charity Day, created to commemorate the 658 BGC colleagues and the 61 Eurobrokers employees who died in the World Trade Center attacks on 9/11.
2.27pm BST
A Hong Kong takeover bid for the London Stock Exchange could be a fine test of the government's commitment to being open for business, while also protecting national assets from predators.
We're always keen to see foreign direct investment, and collaboration with different international interests.
But we'd have to look very carefully at anything that potentially had security implications for the United Kingdom.
2.16pm BST
Our US Politics Live blog is covering Donald Trump's latest attack on the US Federal Reserve:
Related: Trump blasts Fed leaders as 'boneheads' over interest rates - live
1.52pm BST
The Telegraph's Ben Marlow makes a good point -- Brexit uncertainty has left UK assets vulnerable to foreign takeovers.
He writes:
The timing of a blockbuster bid for the London Stock Exchange from its Hong Kong counterpart could not be worse for a Government desperate to reposition itself as the pre-eminent global free trading hub.
The City will be pivotal to any such attempt to build a thriving economy outside of the European Union and the LSE is the beating heart of the Square Mile. Yet the irony of the EU referendum is that it has turned UK companies into sitting ducks.
"'Free Trade Britain' has a dilemma on its hands."
Hong Kong's bid for the London Stock Exchange will be the biggest test yet for post-#Brexit Britain, writes @benjaminmarlow https://t.co/cVcGwDB5GP#LSE #HKEX
1.21pm BST
Here's Mark Sweney's news story on the potential merger of the Hong Kong and London stock markets:
Related: Hong Kong stock exchange makes 32bn move for London counterpart
1.07pm BST
Predictably, Sports Direct's annual general meeting today turned into the usual farce.
The UK-listed company refused to let journalists into the room where the thermostat was cranked suspiciously high, almost as if they wanted it over quickly.
Another Sports Direct agm another protest.. reporters mainly stuck outside as company denying access.. pic.twitter.com/kEKKDDuW3n
AGM over. Now "informal" questions being taken. Barnum Street Capital asking what effect the negativity around not having an auditor is having with suppliers like Nike giving stock to JD Sport "because they don't take you seriously"
Mike answering - takes issue with being called a "discounter". Now lashing out at the media "painting me as a panto villain". (Speaking far more eloquently about the high street than virtually any other retailer)
"If you want me to paint me as the panto villain - carry on." Urges investors to ignore the "fun" in the papers about him. Now making very good points about business rates
Now onto lack of dividend at SD: "I begged them [Debenhams] not to pay the dividend. If they hadn't paid the dividend they'd still be there."
Shareholder tells board: "10 years without a dividend is a disgrace" and asks how company can afford share buy backs but not dividends
And that's it. Final question was on the Belgium VAT issue. No update.
Chris Wootton says Sports Direct has met with Belgian tax authorities and still believes there will be no "material liability"
1.04pm BST
Will Howlett, research analyst at Quilter Cheviot, suspects a bidding war could now break out for the London Stock Exchange...
"The Hong Kong Exchanges and Clearing offer is equivalent to c. 8,361p per share and would represent a multiple of c. 37x on consensus 2020 earnings, which is a significant premium to the exchanges sector, typically trading on a multiple of 20-30x. This is an elevated multiple but we still believe there is a possibility that rivals may express an interest with the LSE seemingly 'in play'.
"This proposed offer would disrupt LSE's offer for Refinitiv, which we view as an attractive combination delivering high levels of earnings accretion, creating an industry leading market infrastructure provider, increasing recurring revenues and the exposure to higher growth in the US and emerging markets.
12.23pm BST
Getting back to the LSE-HKEX merger proposal... and Neil Wilson of Markets.com has written an excellent explanation of why it won't happen.
He argues that the British government won't want to see the London Stock Exchange effectively in Beijing's hands:
The UK government may not wish to see such a vital symbol of UK financial services strength, and indeed a strategic asset, to be owned by foreigners; effectively it would hand it over to the Chinese through the Hong Kong back door. For the time being at least the EU also has a say in this. The US will also be eyeing this very, very closely indeed and not liking much at all.
Nut and bolts - there's not a mammoth premium here and do you as a LSE shareholder now fancy ditching your LSE stock in favour of a Hong Kong listed share (just 41% of the new company to boot) which at any moment could be appropriated by Beijing should they so desire? No thanks. Secondly, LSE is all-in on the Refinitiv deal so why would they pull out now for such a gamble? It doesn't make sense. I guess the question now is whether this approach forces others to join the party and spark a bidding war. Not everyone is so warm to the Refinitiv deal as the stock price adjustment suggests - a better premium from say a (US) rival could look appealing to shareholders.
11.56am BST
Newsflash: Donald Trump has accused America's top bankers of being "boneheads" for not cutting interest rates.
In the latest of a series of attacks on the Fed, Trump claims that America's interest rates should be zero -- allowing it to refinance its debts.
The Federal Reserve should get our interest rates down to ZERO, or less, and we should then start to refinance our debt. INTEREST COST COULD BE BROUGHT WAY DOWN, while at the same time substantially lengthening the term. We have the great currency, power, and balance sheet.....
....The USA should always be paying the the lowest rate. No Inflation! It is only the naiveti(C) of Jay Powell and the Federal Reserve that doesn't allow us to do what other countries are already doing. A once in a lifetime opportunity that we are missing because of "Boneheads."
11.46am BST
The London Stock Exchange is no stranger to merger excitement.
It has made three separate attempts to merge with its German rival, Deutsche Bourse, in the last 15 years. The latest attempt was dramatically blocked by EU competition authorities in 2017.
It is not entirely a surprise that the London Stock Exchange Group is subject to a merger offer.
The LSE Group's share price has been relatively strong year to date and HKEX see this as an opportunity to anchor the London and Hong Kong global financial centres and create a global market infrastructure leader."
It's not a company I play close attention to, so hadn't realised just how good an investment London Stock Exchange had been. It's up 900% over the last 10yrs. pic.twitter.com/i4C2M6YNYq
11.23am BST
Richard Hunter, Head of Markets at interactive investor, says a merger between London and Hong Kong's stock exchanges would be "totemic" -- and could also make strategic sense.
However.... he also believes there are some serious hurdles:
The scale of the deal is one which approximately results in the two exchanges being a merger of equals. The London Stock Exchange has historically fought off approaches from overseas, preferring instead to be the acquirer. It may also be that the likes of the New York Stock Exchange will be looking on with interest.
In addition, the very nature of the Hong Kong approach will be subject to any number of considerations, such as competitive and regulatory issues. This is quite apart from the political questions it raises, both in terms of the history between the two "countries", as well as how an East-West tie-up might be seen in the eyes of the United States, given the current economic situation.
11.14am BST
Here's some instant media reaction to the HKEX-LSE merger proposal.
Julianna Tatelbaum of CNBC calls it 'huge' news, with serious ramifications:
HUGE M&A news this AM
Hong Kong Exchanges and Clearing makes surprise GBP 32bn bid for LSE
My hot take:
1/ Political sensitivity of Chinese firm buying UK exchange
2/ What does this mean for Refitiniv deal LSE agreed in Aug?
3/ Other exchanges likely to come into play now?
BREAKING: Hong Kong stock exchange makes takeover bid for London Stock Exchange !!
LSE has shot up 15%
*interesting timing for Hong Kong given the months of protest , this deal would keep it on the radar for listings
Bold move by @HKEXGroup and its CEO Charles Li. A big pivot away from China after years of tying HKEX's fortunes to the mainland. The deal is also conditional on LSE shareholders voting down the Refinitiv transaction. Blackstone execs will not be pleased. https://t.co/WfLrkfL2sK
Hong Kong Stock Exchange trying hard to crash the LSE / Refinitiv deal https://t.co/jySenwd3iy
10.44am BST
The LSE's shares are dropping back, as traders digest HKEX's offer.
They're now just 6% higher at 72.60, a long way shy of the 22% premium which its Hong Kong rival is offering.
10.42am BST
Newsflash: The London Stock Exchange has issued a rather cagey response to HKEX's approach, calling it "unsolicited, preliminary and highly conditional".
The LSE also insists that it remains committed to its merger with data firm Refinitiv -- which would turn it into a new challenger to Bloomberg.
The Board of London Stock Exchange Group plc ("LSEG") notes the announcement from Hong Kong Exchanges and Clearing Limited ("HKEX") and confirms that HKEX has made an unsolicited, preliminary and highly conditional proposal to acquire the entire share capital of LSEG (the "Proposal").
The Board of LSEG will consider this Proposal and will make a further announcement in due course.
10.38am BST
Here's our news story on the surprise battle for the London Stock Exchange:
Related: Hong Kong Stock Exchange makes 32bn move for London counterpart
10.34am BST
This is the second time in three weeks that a Hong Kong group has tried to merge with a UK company.
Last month, Hong Kong's richest man, Li Ka-shing, won control of pub chain Greene King in a 4.6bn deal.
"Following on closely on the heels of the bid for Greene King from Hong Kong's wealthiest person comes a bid approach for The London Stock Exchange from The Hong Kong Exchange, with the latter stating this would create a world leading market infrastructure group. Shares are up 9% on the news with investors offered 2,045 pence in cash along with 2.495 in HK Exchange shares.
"The LSE's share price has been strong year to date and there have been thoughts the group could be a target again especially following the proposed merger with Deutsche Boerse which fell through in 2017. So although there is much uncertainty surrounding the UK some investors may benefit in the short-term from increased corporate activity."
10.23am BST
Laura Cha, chairman of HKEX, says her company have had "early engagement" with the London Stock Exchange about the proposal.
However, there's no official response from the LSE yet - suggesting that engagement might not have been very friendly.
"We believe a combination of HKEX and LSEG represents a highly compelling strategic opportunity to create a global market infrastructure group, bringing together the largest and most significant financial centres in Asia and Europe. Following early engagement with LSEG, we look forward to working in detail with the LSEG Board to demonstrate that this transaction is in the best interests of all stakeholders, investors and both businesses."
10.17am BST
Shares in the London Stock Exchange have surged to a new alltime high.
Shares jumped 16% to 78.94, after Hong Kong Exchanges and Clearing surprised the City with its move on the LSE.
10.00am BST
NEWSFLASH: Hong Kong's stock exchange has launched an audacious attempt to merge with the London Stock Exchange.
Create a world-leading market infrastructure group with a global footprint, diversified across asset class, ideally positioned to benefit from the evolving global macroeconomic landscape, connecting the established financial markets in the West with the emerging financial markets in the East, particularly in China.
9.49am BST
China has taken steps to de-escalate the trade war with America, by removing tariffs from 16 types of US goods.
Beijing's State Council announced that the items, including some chemicals, anti-cancer drugs and lubricant oils, will be exempt from its latest tariffs for a year.
At the very least it suggests a willingness to engage seriously in these talks. Nevertheless I think we remain a long way and even a presidential election away from a deal.
Related: The Federal Reserve must be honest about Trump's trade war
9.26am BST
The "relentless sell-off in global bond markets" shows little sign of abating just yet, warns Jim Reid of Deutsche Bank.
He points to a headline yesterday, suggesting that the European Central Bank might delay launching a new quantitative easing (bond-buying) package.
The headlines got the market excited but a closer read suggested that the base case from the main source in the article was that QE was still likely to be announced.
9.12am BST
Germany's 30-year bond yield has burst back into positive territory!
The 30-year bund is swapping hands at 0.033% this morning, having fallen below zero last month. That means Berlin can still borrow very cheaply, but will have to pay some interest to its lenders.
Good morning from #Germany, where the announcement by the Minister of Finance to spend 'many billions' if necessary to prevent a recession has triggered a global bond crash. 30y German govt bonds yields are back in positive territory. pic.twitter.com/SP27upbbzJ
8.35am BST
The big worry is that the rise in bond yields will leave some investors with unpleasant losses.
At the end of August, the amount of debt trading at negative yields surged to $17 trillion, an all-time record. But in recent days, this has dropped back to $15 trillion.
ICYMI! The amount of outstanding negative-yielding #debt has fallen by almost USD 2 trillion in recent days. Have we seen the low in global bond #yields? pic.twitter.com/snwIPRDHIf
8.30am BST
Britain's sovereign debt is also under pressure this morning, sending yields up to six-week highs.
The yield on UK 10-year gilts jumped to 0.666% this morning, up from a low of just 0.339% a week ago. That means it would cost the UK government more to borrow for a decade - although it's still cheap in historic terms.
8.15am BST
Here's Mohamed El-Erian of Allianz on the latest bond moves:
That's quite a sharp two-day (and a bit!) move up in yields on US government #bonds. Among other things, it's indicative of how technically stretched dominant positioning was (and probably still is to a large extent) after a period of such sustained fall in in yields worldwide. pic.twitter.com/YXrfHkHKPm
8.14am BST
Marketwatch's Sunny Oh reckons bond traders are worried that Mario Draghi might disappoint them tomorrow, at his final meeting as ECB president.
Investors are looking ahead to the European Central bank rate decision on Thursday, where it is expected to announce stimulus measures. Push back by some ECB policy makers on the case for further easing, however, has dampened hopes that the central bank will an ambitious stimulus package.
ECB President Mario Draghi has insisted it still has policy tools available amid questions that the central bank has run out of ammunition, but analysts say it's not clear if monetary policy can boost economic growth in a world where debt yields are already negative.
8.03am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Hopes of diminishing U.S.-China tensions and reduced risk of no-deal Brexit have prompted investors to take profit in risk-off trade ahead of key central bank policy meetings.
Related: MPs look to bring back May's Brexit deal with vote on referendum
The downside correction in global sovereign markets continue in the final run-up to the ECB and Federal Reserve meetings this week and the next respectively.
Investors are trimming long speculative positions in sovereign bonds, as dovish expectations have certainly gone well ahead of what central banks would deliver at his month's meetings. As such, the US 10-year yield recovered past the 1.70% mark, and the 10-year bund retreated past -0.55%.
Just been told Sports Direct is banning all media from its AGM tomorrow.
Never a good look when a company shuts out journalists. What happened to its "very open" promise in 2016? Mind you "very prudent" and "very compliant" also in question... pic.twitter.com/1ebagZTIN0