Skip to comments.Like a lamb, London surrenders London Metal Exchange
Posted on 06/19/2012 11:44:40 PM PDT by Olog-hai
Hong Kong Exchange & Clearing has paid £1.4 billion for the London Metal Exchange, a company which makes £11.2 million operating profita multiple of more than 124 times.
Even Facebook only managed a multiple of 76 times when it floated, and look what's happened to that.
Clearly HKEx is desperate to buy LME, which is very good at what it does, and has basically agreed to pay any price necessary. Why?
On a mundane level, of no concern to you or me, it can now ramp up the fees it charges investment banks and the like to become members of the exchange and trade the world's industrial metals. LME's members are also its shareholders so will see HKEx recoup some value that way.
But HKEx will be able to use its influence with Beijing to funnel far more of China's metals buying activity through its LME subsidiary, creating value that way too.
To do so, it will open one or more of the LME's regulated warehouses in mainland China. These are the facilities needed for physical delivery. China accounts for 42 percent of world metal consumption, but only a smaller proportion of those volumes are traded through LME.
We've tended to ignore any lack of reciprocity, but the LME deal is starting to make this casual ambivalence look like complacency. The LME's success took London 135 years to create. But its control has now gone to a place from where it can never be recovered because a different set of state-sponsored rules apply that would never be tolerated here. If we're willing to let LME go under such lopsided conditions, what's next?
(Excerpt) Read more at telegraph.co.uk ...
Thank you for posting this.
(Things that make you go Hmmmmm.......?)
Hey, it's already happened. Nothing's next.
The LME sold off for 124 years earnings. That’s not the action of a Lamb, but a Fox.
No-one has to trade on the LME. If the Chinese frack up the LME, traders can use or set up other exchanges.
No, not true. Ever read the story of Esau selling his birthright for a bowl of pottage?
Try again. They won’t be able to get that strategic exchange back. You don’t sell out to fanatics.
Free market is what we preach, so free market is what we must practice.
Just take the money and set up a competitor. That's undoubtedly the plan.
Oh noes! How will people sell metals to each other without using that exchange?
The reason people use the LME is that it is efficient, cheap, fair and robust - and it has a good timezone.
If it stays that way then no-one has lost anything, and the Chinese will make a profit - in 125 years.
If it stops being that way then it becomes vulnerable to competition - and a new LME will arise.
as ac (who lives in Britain btw) said, “If the Chinese frack up the LME, traders can use or set up other exchanges.”
When in history has that happened?
They would love for that to happen, but they know that nobody is going to accept a communist currency as a world reserve currencyunless of course their twisted dream of turning the whole world communist happens (or a significant chunk of the world, which would mean communist control of the vast majority of resources, but that will never happen). So far, their horse in terms of reserve currency remain the euro, for all its problems. They are definitely dedicated to knocking the dollar of its perch.
Well, since the Chinese have never fracked up an exchange yet, it hasn’t happened yet. however there are newer exchanges that knock the socks off older exchanges — the NASDAQ or the NSE for example. An exchange is only worth it if people want to trade on it.