Exchange tie-ups put focus on Asia
A wave of stock exchange consolidation globally has thrown the spotlight on Asia's bourses, sparking a rally in shares of Australia's ASX
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The deal came just hours after the London Stock Exchange
The latest consolidation mounts pressure on Southeast Asian exchanges, which have avoided mergers because of tight ownerships and political obstacles, although these bourses are taking steps to promote cross-border trading [ID:nSGE71101M].
The competitive threat from the alternative trading pools makes strategic sense for traditional exchanges to combine resources so they can compete better, said Neo Chiu Yen, vice president of equity research at ABN AMRO Private Bank in Asia.
SGX's $7.9 billion bid for the ASX faces major political and regulatory hurdles in Australia but investors said the latest deals appeared to strengthen the case for a tie-up.
Shares in both companies outperformed their wider markets on Thursday. ASX shares were trading 4.5 percent higher, while SGX shares were up 1.3 percent in Singapore.
That whole game's moving very fast now. Maybe it gives the ASX-Singapore Exchange (deal) a bit of a kick along, said John Sevior, head of equities at Perpetual Investments, ASX's biggest shareholder.
It just depends on how broad the government's horizons are. At the moment, it's mired very much in domestic political issues.
Sources close to the deal said there had been informal dialogue in recent weeks between SGX-ASX and Australian politicians and the country's Foreign Investment Review Board (FIRB), which has the power to block any deal. However, SGX had not yet formally submitted its application to FIRB.
The ASX said the two deals highlighted its argument that consolidation was necessary.
The developments overseas do underline the global trend toward exchange consolidation in response to the dynamic changes that are shaping the market, an ASX spokesman said.
However, the leader of Australia's powerful Greens party reaffirmed his strong opposition to the ASX-SGX tie-up.
If I was in New York I would be advocating that the stock exchange remains in American hands, Greens leader Bob Brown said.
While many analysts said the deals should bolster the case for a SGX-ASX merger, one analyst said the LSE could now be seen as an alternative partner for ASX.
LSE is clearly making a play on the mining-resources side of things and Asia is in general very resource hungry, so if Australia wasn't potentially tied-up with SGX, which isn't a done deal yet, that would be one option, said Niki Beattie, managing director of trading consultancy Market Structure Partners.
Many smaller Asian exchanges were not yet feeling the pressure from alternative equity trading, although Hong Kong and Malaysia's bourses could be candidates for deals, analysts said.
Looking at the other stock exchanges, it is a bit too early to say that we are going to see a wave of consolidation in Asia, unless those markets open up, show aggression in terms of attracting listings beyond their domestic companies and liberalize the exchanges a lot more in terms of ownership, said Harsha Basnayake, head of Transaction Advisory Services in Southeast Asia for Ernst & Young.
Certainly the HK exchange is there and then there is Bursa Malaysia as potential candidates, Basnayake added.
(Additional reporting by Sonali Paul in MELBOURNE, Kevin Lim and Rachel Armstrong in SINGPAPORE; Editing by Ed Davies and Vinu Pilakkott)
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