1. Why do you describe this transaction as Lungang Century Marriage?
Both the London Stock Exchange and the Hong Kong Stock Exchange are the financial infrastructure of the most important markets in the world. A successful combination of the two will create a global layout, a world leader, covering the three major time zones of Asia, Europe and the United States, while providing international financial transaction services for major currencies such as the US dollar, the euro and the RMB, with a total market value of more than 70. The $1 billion exchange group provides an unprecedented global market interconnection platform for market participants and investors around the world to meet future market demands.
The London Stock Exchange is one of the largest exchange groups in Europe. Its business is highly complementary to the Hong Kong Stock Exchange. The proposed transactions are in good agreement with the three-year strategic plan of the Hong Kong Stock Exchange. If successful, it will be the first marriage between East and West capital markets, which will create a leading international exchange group and stand on the top of the global capital market.
2. What is the significance of this marriage to global financial markets?
We believe that this marriage is a symbolic measure to conform to the new channels of international financial development and to show the new pattern of global financial development in the future. This transaction has five important implications for global financial markets:
First, the London Stock Exchange is one of the most important exchanges in Europe and the United States, based in London as the global financial centre of offshore dollar, while the Hong Kong Stock Exchange is one of the most important exchanges in Asia, based in Hong Kong, the most important offshore RMB business hub in the world. Together, they will create a truly cross-East, global financial infrastructure and exchange group, and will become the leading international trading platform for financial assets denominated in major currencies such as the US dollar, the euro and the RMB.
Second, the London Stock Exchange is the global leader in fixed income and money markets, while the Hong Kong Stock Exchange is the global leader in stock, stock derivatives and IPO markets. The strong combination of the two will provide global listed companies and investors with full assets, all-round and all-product services.
Thirdly, the London Stock Exchange is the core post-transaction service financial infrastructure for global asset transactions, such as liquidation and settlement, while the Hong Kong Stock Exchange is the most complete and close interconnection pioneer and leader between global capital and the Chinese market, and based on cross-border capital net settlement. Based on the regulatory mutual assistance mechanism established by the Mainland and Hong Kong, strong cooperation between the two countries will become a vital investment and trading and risk management financial infrastructure for the free flow of capital and market integration between the East and the West in the world.
Fourthly, the London Stock Exchange provides rich, comprehensive and multi-level financial services and products to the most valuable and resourceful companies and investors in the mature economies of Europe and the United States, while the Hong Kong Stock Exchange covers the more dynamic population and industries in emerging markets and the more rapidly growing Asian economies. Together, they can provide a wide range of global financial services and products to Asian investors. The emerging economies in Asia, especially Chinas huge middle class population and wealth accumulation, and the large-scale inland financial capital that has not yet been fully opened up and realised international allocation, as well as the inland industrial capital that is hoping to enhance industrial efficiency and promote economic transformation through global allocation, will be mature capital markets in Europe and the United States. Development brings a continuous and dynamic source of long-term capital.
Fifth, the London Stock Exchange has the worlds leading index and data analysis capabilities, as well as the most extensive and top-end sales pipeline. The Hong Kong Stock Exchange is working to tap the commercial potential of data as a new generation of asset trading, aiming to provide new momentum and vitality for the global financial services industry with the help of massive data generated by the highly digitized economic structure in Asia, especially in China.
We believe that this marriage will help deepen Sino-British economic, trade and financial cooperation, benefit Hong Kong, the Mainland of China and the United Kingdom, and thus promote close cooperation in the turbulent international environment of the global financial system.
For Hong Kong, this marriage will enable Hong Kong to reposition itself in the global financial system. Hong Kong is no longer just a gateway for foreign investment to enter and exit the Chinese market, but also a pivotal international financial market platform under the new international financial structure. It will also provide Hong Kong with new impetus and new impetus to connect China with the world. Space.
For the mainland of China, under the background of RMB internationalization and the gradual liberalization of capital projects, it is also a short-term bottleneck to promote RMB internationalization only by trade valuation. Therefore, it is very important to obtain direct support from the international financial market at present. This transaction can provide a new path and channel for the interconnection of stocks, bonds, indices and other financial products. It also provides a convenient and efficient financial platform for the integration of RMB-denominated financial assets into the international financial market and helps China to make full use of the global financial infrastructure.
For the UK, the merged exchange could consolidate Londons position as a global financial centre. As the history of Londons growth as an international financial centre has repeatedly proved, London will continue to gain tremendous growth opportunities from the globalization of international capital markets, and benefit from the process of RMB becoming the main international currency and RMB-denominated financial assets gradually entering the international market. Just as London benefited from Eurodollar trading in the 1960s to become todays global dollar trading centre, the merged exchange will boost global market confidence in London as the worlds major financial centre.
4. Since its a match made by heaven, why do we put forward this proposal now?
There may never be a perfect time for strategic trading. No one can guarantee success, but you can never succeed without trying. The experience of Hong Kong Stock Exchanges acquisition of LME in 2012 proves this point. Successful experience at that time laid a solid foundation for our further international acquisitions, and also gave us a deeper understanding of Londons capital market. Given the uncertainties of the international situation, it may not be the best time to engage in huge cross-border transactions, but the reality is that time is running out.
All in all, today is the beginning of the experiment. We will do our best to achieve this rare cross-border marriage.