The Stock Exchange of Hong Kong today (Tuesday) confirmed that its financial advisor Merrill Lynch (Asia Pacific) Ltd. received a letter from Morgan Stanley Asia Ltd. last Wednesday, June 23.  The letter proposed certain terms of merger between the Stock Exchange and the Hong Kong Futures Exchange.

Upon the recommendation of Merrill Lynch, the Executive Committee of the Stock Exchange rejected Morgan Stanley's proposal on June 25 on the grounds that the proposed terms failed to reflect the true economic value of the Stock Exchange, its strategic position and its future prospects.  The proposal lacked meaningful analysis and totally failed to reflect an appropriate valuation for the Hong Kong Securities Clearing Co. Ltd. ("HKSCC") as well as the basis upon which Members of the Stock Exchange would receive that value.

Merrill Lynch has today submitted to Morgan Stanley the Stock Exchange's proposal which reflects more appropriate valuation of the Stock Exchange, Futures Exchange and HKSCC and is fully supported by detailed analysis. A presentation of the Stock Exchange's Proposal was given to the Council of the Stock Exchange.

Corporate Communications Department