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Hong Kong Exchanges' Bid For LME Will Give China More Power In Global Commodity Trading
Forbes ^ | 6/19/2012 @ 2:10PM | Agustino Fontevecchia

Posted on 06/19/2012 10:48:44 PM PDT by Olog-hai

Last week’s bid by the Hong Kong Exchanges (HKE) for the London Metal Exchange (LME) flew under the radar, but its underlying importance is paramount. In the most expensive bid ever for an exchange, HKE is looking to acquire the world’s largest metals market place for more than $2 billion, shifting the global hub for metals trading to the East.

Furthermore, as China gradually becomes the world’s most important player in the gold and commodities markets, it will strengthen its grasp on the global gold trade, which it set out to do in its latest Five Year Plan. As the world economy muddles through, China is consolidating its international position in the world of financial markets.

In what Morgan Stanley has called an “extremely expensive” bid, HKE reached an agreement to buy all of LME’s shares for £1.39 billion (about $2.15 billion), or £107.60 per share. Hong Kong outbid major players like NYSE Euronext, the CME Group, and especially the ICE to buy the LME …

Why would the Hong Kong Exchanges pay so much, about 160 times net income (compared with 66 times for the CME’s bid for CBOT) for the LME?

The answer is right on the HKE’s letter announcing the deal. Once they gain control of the LME (which requires the backing of 50% of the shareholders), HKE will leverage its contacts in mainland China to get the government to allow them to operate local warehouses in China, which currently isn’t allowed by the People’s Bank of China (PBoC). They are also looking to clear trades in Asia, and raise the number of Chinese participants in the exchange, currently below 25%. Essentially, they are looking to dominate China’s commodities trade with the rest of the world.

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TOPICS: Business/Economy; Crime/Corruption; Foreign Affairs; United Kingdom
KEYWORDS: basemetals; globalrevolution; marketmanipulation; redchina
This is Lenin’s words coming to life: “The capitalists will sell us the rope with which we will hang them” . . .
1 posted on 06/19/2012 10:48:51 PM PDT by Olog-hai
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To: Olog-hai

The capitalists just sold that rope for *124 years of earnings*.

And at the end of the day: it’s a trading exchange. If the Chinese frack the LME up traders can move elsewhere.

2 posted on 06/20/2012 12:45:43 AM PDT by agere_contra
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To: agere_contra

Wrong again. You do not sell out to your enemies.

3 posted on 06/20/2012 2:13:27 AM PDT by Olog-hai
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