China questions hang over stock exchange bid
When Hong Kong Exchanges & Clearing (HKEX) bought the London Metal Exchange in 2012, the access it offered to the Chinese market was a big plus.
But with questions mounting over Beijing's role in Hong Kong affairs, those ties now represent a threat to HKEX's £29.6bn (€33bn) bid for the London Stock Exchange.
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It is an unfamiliar position for the corporate leaders who have made drama-free links to Beijing key to their international appeal. Amid the US trade war and scrutiny over China's role in Hong Kong's unrest, the connections are emerging as a commercial handicap.
Further complicating HKEX CEO Charles Li's audacious offer is the $27bn deal LSE made in July for data provider Refinitiv. Scrapping that is a condition of HKEX's bid.
"LSE is at the centre of Britain's financial market," said Cecelia Zhong, CEO of Guojin Resources and a former HKEX executive. "As it is busy focusing on its own data deal right now, the last thing LSE wants to consider is foreign ownership, particularly a Chinese player to control it."
The Hong Kong government, which owns 6pc of HKEX, appoints six of the company's 13 board members, and the city's CEO, a person appointed by Beijing, picks the company's chairman. The structure means the exchange operator comes under a level of political oversight unusual among other developed market bourses.
Other Hong Kong companies have faced similar challenges even before the protests exploded earlier this year into the biggest crisis in Hong Kong since the city's return to China in 1997.
In November, Australia rejected a A$13bn (€8bn) gas project bid by Hong Kong tycoon Victor Li's CK Infrastructure Holdings, calling it contrary to the national interest. The decision followed a torrent of criticism in Australia that Hong Kong companies were just as susceptible to Beijing's influence as those on the mainland.
US regulators last year rejected a bid by a Chinese-linked consortium to take over the Chicago Stock Exchange, a deal then-candidate Donald Trump blasted when it was announced in 2016.
The unrest also put unwelcome pressure on Hong Kong companies, particularly Cathay Pacific Airways, which faced a heavy backlash from China in the wake of its employees joining protests.
About a month ago, China's civil aviation authority began clamping down on Cathay, prompting the carrier to fire staff and threaten to terminate workers for even supporting the demonstrations, let alone participating in them.