Yes it seems the tide is turning on China. If they want to play ball with the rest of the world they need to reform into a modern democracy and the CPC needs to go away. Otherwise, we need to limit the authoritarian contagion. China is pretty much exploiting Capitalist greed to get the Western world to sell them the rope to hang them with.
It took the British over 70 years to fully pacify the Hong Kong people, culminating in the ‘67 protests that ended with over 50 dead protesters. Heck, it took well over a hundred years after the Civil War before true civil rights.
Maybe we just need more time before the Chinese change?
I am often frustrated how CCP infiltration is not on the political radar of most Western society.
We in HK witness on first hand the determination and capability of CCP to slowly gobble up our society. If CCP would be allowed to sliently infiltrate Western society and political sphere, in 20yrs........
Without evoking Godwin's law, just think about it: China is a dictatorship oppressing free speech and many of their citizens that don't share the official views, torturing them, closing them in concentration camps etc. As a politician, you should know better how to express your admiration for progress.
That's definitely a huge problem for the USA, on many levels. However, people in the USA don't regularly self-immolate to express how badly their compatriots are treated, and this happens regularly in Tibet. One would think this would give the Western world a good idea of how oppressive the Chinese regime can be.
Yeah, that's not going to happen and the West doesn't really have leverage against China anymore. On the contrary, China has leverage against the West. Some countries like New Zealand are straight up heading to become a Chinese colony in 50 years.
I can tolerate the empire that I am a part of because at least I know I can criticize its evil deeds without having them censor every little thing about them... which can potentially convince them to change, not so for the CPC.
Whataboutism is just plain dumb. One country doing bad things in no way justifies any other country doing bad things. Especially when there is broad agreement amongst most people that both things are bad.
I think geogra4's tone was of a kind with the post to which he was responding, which seemed to be asserting that only "modern democracies" (which there appear to be a scant few of these days) could "play ball," and that therefore China is, I guess, disqualified from participating in the world economy?
This is deeply subjective obviously: It didn't strike me as "whataboutism," but more a refutation of what seemed like a moral-political superiority complex. Devopyl's comment expressed this old-fashioned view; very reminiscent of the 80s and 90s, for me, and I think geogra4's balloon-popping was well in order.
We may have different definitions of "whataboutism" as well :)
I don't understand how HKEX has this much money (or can raise) to buy LSE (or invertly why LSE is worth this much). Exchanges don't do clearing so essentially just a glorified piece of matching software running 24/7. HKEX has their own data center in the middle of nowhere granted which I've been to and yeah more impressive than say an Equinix such HK1 but still the figures don't seem right..
It's not hard when you have government gifted statutory monopoly and are also given control of listing and clearing regulations.
The government ban on any competition to HKEX means that their net profit margin was 61% last year.
As activist investor David Web put it:
"On top of that, HKEX doesn’t even do its job well as an exchange, because it has been exempted from the Competition Ordinance and has fees, profit margins and archaic practices that only a monopoly could get away with."
>Exchanges don't do clearing
True, but this is HKEX, which stands for Hong Kong Exchanges and Clearing. They operate 4 clearing houses in HK.
update: 61% was first 9-months. Fully year was 58%
Exchanges only have a couple of hundred customers afaiu, with the volume coming through only a couple of dozen, everyone else is through their prime broker. In other words there is a limit on how much they can pull fees up before liquidity moves elsewhere. I wouldn't be surprised too if the matching software was off the shelf.
> I wouldn’t be surprised too if the matching software was off the shelf
If there exists a business whose product is “scalable real-time order-book matching software” as licensed software or SaaS, I’d love to know about it! I’m in an adjacent space, and I’d love to strike up a partnership with such folks.
As far as I know, such a business doesn’t exist; all the big exchanges maintain their own core IP, much like all the big telcos in the 90s maintained their own core telecom-equipment IP. From what I know of the space, each player thinks that licensing the IP would just be either inviting a new player to the table, or more likely inviting enough new players to the table that other parts of the trading value chain would start to see value in abstracting-away and commoditizing their part of it.
The expected long-term effects of each anticipated Brexit scenario weighted by the current perception of the likelihood of each should be, sure.
OTOH, as there is considerable and evolving uncertainty about even the short-term Brexit prospects (as in, will the UK leave, and if so when and on what terms), estimates of the likelihood of various long-term scenarios are likely to also be in considerable flux,even before considering potential evolution in estimates of the effects of each potential scenario.
“The market knows the future and has already completely priced it in” is disproved every time the market moves, but people still like to treat it as some kind of deep wisdom.
> “The market knows the future and has already completely priced it in” is disproved every time the market moves
Well at best you can know the future probabilistically. The fair price of flipping a coin and getting $2 on heads is $1, but once the coin is flipped, you have new information, and the fair price is either $2 (if it landed heads) or $0 (if tails).
No, but it's generally understood to be very unlikely . And if something as well studied as markets exhibited NP in P behavior we would have exploited it by now (FWIW, markets appear to be an efficient approximation algorithm like evolution is; approximation algorithms (like evolution) being something we use all the time to solve engineering problems).
The yo-yo price of the Pound as no-deal Brexit has become more or less likely over the past few weeks demonstrates that Brexit is very much not priced in.
No-deal would be so damaging that the markets don't think it's going to happen, and that props up the Pound. So it takes a lot of political madness to convince the market that the worst is happening, and that's when the Pound starts plumbing historical depths. Then the madness recedes, and the Pound bobs back up again.
No one knows what Brexit actually is though. It's either not happening, kicking the can down the road till the UK manages to square the circle w.r.t. Northern Ireland  (i.e. the current deal), or crashing out with no deal causing days long waits at the ports of entry as inspections take place.
How do you price in all those disparate outcomes into the same price?
 UKs own requirements for Brexit are mutually exclusive 1) No customs union, 2) No Northern Ireland border, and 3) No border inside the UK. These three can't exist in the same deal. The only real way to properly Brexit would be to cut Northern Ireland lose or risk reigniting the Troubles by violating the Good Friday Agreement.
Look at the volatility of the pound. It's not moving with news about the long term effects of Brexit, it's moving with the short-term political news. The range of uncertainty is incredibly large: when, how, and whether Brexit happens is still up in the air.
Conditioned on Brexit actually happening, a prediction of a weaker pound is reasonable.
The Euro didn't exist and the 70's started under the Bretton Wood's agreement. It wasn't until '76 that countries agreed to a floating currency. I don't think London's ability to influence a basket of mediocre pegged currency's gives us any insight into their ability to influence the Euro.
No, I know what the eurodollar is. The power of London over the "eurodollar" at the time was that the businesses and banks in Europe were doing business locally in their domestic currencies (eg Italian Liras) which did not have any international clout. These businesses and banks were effectively forced to go through London Eurodollars to operate internationally to minimize risk. With the introduction of the Euro, none of that matters anymore and London has no power.
"Could you elaborate on this or add a link to an article that explores this under-mentioned reason as one of the contributing factors for the UK's decision to pull out of the EU?"
I did not make this statement. But
1. I once saw a graph that showed that the re-rise of the UK strongly correlated with oil production. The correlation does not imply causation but it was quite stunning. I looked several times for the article but did not find it again. But it made me always doubt that it was only Thatchers reforms the reinvented the UK.
It is when you count in influence, "the old boys club", prestige, and "being a financial center" . I have no doubt that over the long haul that would be cheap. One more nail in the West's coffin from the point of view of Asia.
As roeal_v pointed out this deal requires that that transaction not go through. And again, Revinitiv is being purchased for only 4X earnings (which are themselves 3X the LSE's).
Fundamentally though I don't see why an exchange is worth much. Yes it sees all the deal flow, but it can sell info, it can't trade on it (else, apart from getting in trouble with regulators, it would lose all its customers).
Exchanges can have something that looks like Monopoly power when you need access to their data. Yes, certain instruments trade everywhere and on different exchanges, but when LSE/NYM/ICE etc is considered THE benchmark for XYZ contract, you have to buy their feed to get the best pricing data.
I don't think the British have ever really had a huge problem with foreign countries owning significant British companies. Is this signficantly different from Tata motors owning practically all of british steel production? or French companies owning big chunks of our energy production capacity?
Who owns the company has very little to do with whether it's operating in the UK.
The relationship between India & the UK is quite a bit different than with China. Also the impact on the economy that foreign owners could have through an individual company is significantly less than what could be achieved with the continent's largest exchange. In the past China has had no problem financially blackmailing a company into submission when they happen to reference Taiwan as an independent country. It was very much like "Oh, nice business you have, and lots of it in China! Shame if something were to happen to it. Shame about your slip up with Taiwan too. Shut it down, your business in China, for a few weeks. And publicly grovel like a dog begging for a treat."
I can only imagine what they would do if China owned the LSE and there was any type of high-profile disagreement with China & the UK or Europe.
Except this doesn't really have anything to do with London or Hong Kong the cities/countries. It's one publicly traded company bidding to take over another. They both just happen to have a city name in their company name.
May be not on the London side but article says "HKEX, whose main shareholder is the Hong Kong government, .... ". With Hong Kong now being part of China, I am not sure if this would have some political implications.
Well Hong Kong is basically owned and run by real estate billionaires. And it looks like they are doing a little hedging before China tightens some scews. Few weeks back they bought UK's largest pub operator.
I wonder, would HK owning the LSE make it more or less likely for China to send in the stormtroopers? My first thought was that this was a move to make HK more of an untouchable, international city. But HK billionaires simply investing offshore sounds more likely--presuming they have a direct stake in the exchange.
I used to live in the City of London. I was invited to one of their resident's association meetings.
They some senior people in the City of London government was clear that they had to balance the desires of the residents with those of employers/employees. Otherwise residents (<10,000) would have significant sway over employees (>300,000).
Its not some weird dystopian future. It simply makes sense to listen to those who live and work in the City.
> The London Stock Exchange isn't technically in London - it's in the City of London, an exceedingly weird semi-autonomous enclave where corporations can vote in elections.
The City of London is part of Greater London and subject to the jurisidiction of the Greater London government. ("Greater London" being the entity that most people are thinking of when they refer to "London"). The London Stock Exchange is in the City of London, which means that it's also in London (Greater London) as well.
The City of London Corporation (note not council) is indeed within Greater London, but still has some weird hangovers from the medieval era, including the Temples and a strange and unique electoral system. It's the Corporation that is the main body administering the region.
It is organised differently to anywhere else in the UK, and distinctly odd. The rest of the UK got rid of those few last remnants of the Middle Ages in the 50s through 70s, though nowhere had kept around as many as the City.
It'd be a pretty tone deaf political move to allow a foreign power to buy a well known UK institution given the current little-island campaigning by the government (even if they try and spin it as the idea we trade with other countries outside the EU).
Politics aside, there's often the mindset that a foreign company would look to increase "efficiencies" and then offshore elements. Not many people will cry tears over lost City jobs, but there'd be an interesting narrative at play.
The imagined scenario is economic warfare by the Chinese government forcing HKEX to just stop trading on the British stock market. Given how important the stock market is to a modern economy it'd be a powerful hit even if it only stayed off for a few days.
The current situation in Hong Kong? Selling something like the LSE, only to risk it being controlled by China in the near future should automatically result in the UK government blocking the sale even before it's consider any further.
This seems like it would be a bad sale to make. Having one of the world's largest exchanges seems like it would be a strategic asset for a country that it wouldn't want to lose. To top it off, the buyer is an authoritarian regime that has been intent on expanding its influence to all areas of the global economy at the same time that it threatens or penalized companies that don't tow it's authoritarian line or propaganda. Messing with the LSE could have a highly disruptive impact on the UK & greater European region, which isn't power I'd want any 3rd party to have.
Technically, "Hong Kong Exchanges" aka HKEX is making this offer. But it's worth asking who ultimately controls HKEX.
The Hong Kong government only owns 6% of HKEX, but they have the right to appoint 6 of the 13 directors. If they get one of those remaining 7 directors on their side somehow, the Hong Kong government has total control of HKEX. It seems like the government would be able to assert control if it really wanted to.
And as we've seen recently, the Hong Kong government is basically controlled by the central Chinese government. The Communist party controls all appointments.
If this bid goes through, it would be pretty ironic, because it would mean the Chinese Communist Party now controls the London Stock Exchange. In general I support allowing cross-border purchases but this one seems pretty dangerous.
For example, imagine the Chinese government putting pressure on every company listed on the LSE to stop supporting the Hong Kong protests, or to stop referring to Taiwan as its own country.
It becomes a sort of data monopoly - already, consolidation of exchanges has limited the number of financial data offerings directly from exchanges, and driven prices up substantially. Further, licenses have become much much more restrictive with regard to use.
I feel that the more free and accessible public market information is, the better it is for all forms of investors and other market participants. Consolidation (in my experience at least), has served to move things in the opposite direction. I do not view further consolidation as a move that helps anyone but the executives and shareholders of the two exchange groups.
True, I should have said major countries. A small country has no chance, they best hope to chose the least worst partner /patron. But USA, UK, Germany, France etc can handle stock exchanges just fine without any HK (Chinese?) money /influence.
It's a direct result of their shortsighted, nationalistic decision. The article says it's motivated by a hope of remaining a global economic power, after...breaking existing ties with a global economic power.
You say short sighted. Brexiteers say it is long sighted, so long sighted in fact that Remainers struggle to see any sense in it. Which is where all the "populist" "nationalistic" "racist" "they didn't understand what they were voting for" labels came from.
Being the largest shareholder of HKEX does not mean they're the majority shareholder. Every ownership percentage you've quoted from Bloomberg is an aggregate across multiple investors except the 13.78% owned by the government.
I suspect you assumed largest meant majority because of the number of board seats the government controls. Interestingly, it appears that's unrelated to the government's financial stake in the entity. Securities laws in Hong Kong permit the Financial Secretary (a member of the Executive Council) to appoint up to eight board members. The government's authority over HKEX board appointments is outlined in Section 77 of the Securities Futures Ordinance.
It's interesting to think about where capital goes as global financial centers have turmoil. It's unclear to me whether hong kong or London has larger head winds in dealing with their instability in the next few years: HK seems to be likely to come to a clear resolution with respect to china quite quickly, but the relationship between London and the EU are likely to be in turmoil for quite some time.
I don't have a lot of cash savings, I'm generally quite LONG on smallholder African farmers, but I think if I was going to put money anywhere right now it would be into a mixture of the Nikkei, FTSE (singapore), Dubai, and KOSPI (korea) indexes. I think all of Japan's problems are understood and priced in. Japan and Korea have the advantage of both tending towards matrix organizations (Toyota and Nissan are both unusually resilient to tariffs) and Singapore and Dubai have the advantage of being financial hubs with nothing going on.
> HK seems to be likely to come to a clear resolution with respect to china quite quickly
I'm confused by this theory; the only clear resolution I see China accepting would be a very bad one for HK, which doesn't seem like a positive long-term situation for their status as a financial center.
I understand the reasoning from Aramco's side, but still I'd imagine that would be a bit of a gut punch to Singapore. They've been working hard to position themselves as "Hong Kong, but stable and independent" for some time now.
Interesting strategy. Recently I was having a look at the price of Gold and it seems there is a recession brewing. However, I feel I already lost that train and so I was thinking about buying Swiss currency / Indexes as it is very stable and generally speaking a safe bet when the rest of the world is economical turmoil.