Saturday, February 12, 2011

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, which is trying to convince politicians to support a US$7.9 billion
takeover bid from Singapore Exchange.
Deutsche Boerse's advanced talks to buy NYSE Euronext to create
the world's biggest trading powerhouse was a wake-up call for Asian
bourses which face increasing competition in equity trading from new
The deal came just hours after the London Stock Exchange
announced a bid for Canada's TMX.
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.
"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 US$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 per cent higher, while SGX
shares were up 1.3 per cent in Singapore.
"That whole game's moving very fast now. Maybe it gives the ASXSingapore
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.
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.

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