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The Hong Kong stock exchange could find the London stock exchange "potentially unaffordable," according to one bank's chief strategist.
Hong Kong Exchanges and Clearing Limited (HKEX) said Wednesday it made a proposal to the board of London Stock Exchange Group (LSE) to "combine the two companies" in a deal which values the LSE at about £29.6 billion ($36.6 billion).
But the size of the deal also makes it "more expensive and potentially unaffordable" for the HKEX, Bank of Communications (BOCOM) International's Hao Hong told CNBC's "Squawk Box" on Thursday.
"It's not the cheapest deal," he said. "I think it could put this merger, if (it) goes through, to be ... one of the more expensive exchanges in the world."
"One would expect that the price tag could go up as negotiation progresses," Hong told CNBC by email, in response to a follow-up question. "The Hkex doesn't have any debt. It's unclear how willing the shareholders would be to assume more leverage to consummate the deal."
A spokesperson for HKEX told CNBC via email that the company believes the proposed transaction would be highly compelling for LSEG shareholders, as well as for HKEX shareholders.
"HKEX intends to continue its dividend policy of paying regular dividends with a normal target pay-out ratio of 90% of the profits of the combined group. Also, HKEX intends to apply for a secondary listing of HKEX shares on the London Stock Exchange with effect from completion of the Proposed Transaction," the spokesperson said.
HKEX proposed £20.45 a share in cash, as well as 2.495 newly issued HKEX shares. It said the deal would be funded by a combination of existing cash and a new credit facility.
It cautioned, however, that its statement to the market should be considered an announcement to make a possible offer, rather than as confirmation of a firm intention to bid.
Additionally, Hong said that the HKEX would have to meet "many conditions."
"It's a challenge for Charles, obviously," Hong said, referring to HKEX CEO Charles Li.
One of the biggest challenges HKEX would face is from LSE's recent $27 billion deal to acquire financial data services firm Refinitiv, said Hong.
The HKEX deal "was announced soon after the Refinitiv deal, so you know, there's quite a bit of legal complication and also political overlays on top of the deal in terms of the timing, because of the situation here in Hong Kong as well," Hong added, in reference to months of protests in the city.
For its part, the HKEX has said the proposed deal would only go ahead if LSE backs down from its plan to buy Refinitiv, while the London Stock Exchange said it was committed to and continued to make progress on the planned acquisition of the data firm.
If a deal was reached, however, there are potential benefits, Hong said.
It would allow for 18 continuous hours of trading, he said. Furthermore, he argued, each exchange brings its own strengths to the table.
"The London exchange is very strong at (fixed income, currencies and commodities) while ... Hong Kong is one of the biggest IPO markets in the world," Hong said.
— CNBC's David Reid contributed to this report.