On May 15, 2018, a Chinese consortium comprised of the Shenzhen Stock Exchange and the Shanghai Stock Exchange finalized the acquisition of a 25% stake in Bangladesh’s Dhaka Stock Exchange (DSE), becoming strategic investors in the country’s premier bourse. The Chinese entities were unanimously selected by the DSE in February 2018 over a competing bid placed by the Indian National Stock Exchange and Nasdaq.
Although the 25% stake was valued at $53 million, the Chinese consortium paid $125 million in addition to offering $37 million in promised “technical assistance.” The Chinese overpayment by approximately $72 million is likely an indicator of the strategic (rather than commercial) value placed on this stake.
The Indian bid, albeit lower and ambiguous about technical assistance, was reportedly favored by the Bangladesh Securities and Exchange Commission — the country’s capital markets regulator. Media reports also indicate the Commission ordered the DSE to scrutinize proposals further, despite China’s significantly more attractive offer, but the regulator had no institutional mechanisms to halt the Chinese deal.
The equity acquisition in DSE adds to a Beijing-supported effort announced last month in Abu Dhabi, coined the “Belt and Road Exchange,” which aims to establish an international capital-raising platform supporting Chinese enterprises (and other international companies) in their global investment efforts.