Australian Treasurer Officially Rejects ASX-SGX Merger Proposal

Australian Treasurer Wayne Swan Friday officially rejected the

proposed merger of the Singapore Exchange (SGX) and the

Australian Securities Exchange (ASX).

SGX said in a statement that under the circumstances, both parties

“have agreed to mutually terminate the merger implementation

agreement entered into on 25 October 2010.”

“As Asia’s most international exchange, we will continue to pursue

organic as well as other strategic growth opportunities, including

further dialogue with ASX on other forms of cooperation,” it added.

In strongly-worded language, Swan said the proposal was not a

merger but “a takeover that would see Australia’s financial sector

become a subsidiary to a competitor in Asia.”

He said Australia’s “economic and regulatory sovereignty over the

ASX would be at risk” if the deal succeeded, adding that “given the

size and nature of the SGX, the opportunities that were offered

under the proposal were clearly not sufficient to justify this loss of

sovereignty.”

Still, Swan maintained that the Australian government’s longstanding

policy has been to welcome foreign investment.

SGX rose 2.8 per cent to close at S$8.38 on Friday following the

announcement of Australia’s official rejection of the deal.

Speaking to Biz Daily by phone on Friday, Ng Kian Teck, Investment

Analyst at SIAS Research, said: “This rejection is not necessarily

a bad thing because SGX can put its money to better use

such as possible mergers and collaborations with other ASEAN

(Association of Southeast Asian Nations) exchanges.”

According to analysts, Australia’s attitude could result in ASX

falling behind its peers at a time when other exchanges are

consolidating.

Recent cases include the Deutsche Boerse AG-NYSE Euronext

merger and the proposed tie-up between the London Stock

Exchange and TMX Group, operator of the Toronto Stock

Exchange.

Despite Swan’s decision, ASX reiterated in a statement on Friday

its “ongoing belief in the need for ASX participation in regional and

global exchange consolidation.”

“ASX will continue to evaluate strategic growth opportunities,

including further dialogue with SGX on other forms of combination

and cooperation,” the statement added.

Swan’s official rejection confirmed the sentiments of the majority of

readers who were polled by Biz Daily since October 27 last year,

soon after the merger proposal was announced.

When asked whether they thought the proposed SGX-ASX merger

would succeed, 61 per cent of Biz Daily readers who responded

said “No”, while 31 per cent said “Yes”. Only 8 per cent said they

were uncertain.