Singapore Exchange (SGX) agrees deal with Australian Securities Exchange (ASX) to create potential Asian powerhouse

The Singapore Exchange (SGX) announced on Monday the agreement of an US$8.4 billion takeover of the Australian Securities Exchange (ASX). If it were to go through the deal would create one of the world’s biggest exchanges and could seriously challenge Hong Kong and Tokyo as the Far East’s regional financial centre. However the plan is facing opposition from some Australian MPs with the Singaporean government’s 23.5 per cent shareholding in the SGX presenting a potential stumbling block.

As a combined entity it would have a greater ability to attract large Asian companies and allow both exchanges to break out of their small domestic markets. It would also be well positioned to capitalise on the current shift of capital from West to East with Singapore Exchange chief executive Magnus Böcker, who stands to lead the joint exchange, envisaging a SGX-ASX merger as a ‘gateway to Asian capital markets’. It is estimated that the takeover would create an exchange commanding US$12.3 billion in market capitalisation making it the fifth biggest in the world.

The move comes as the ASX stands to lose its monopoly on operating a stock market in Australia at the end of the year. Yet some Australian MPs have voiced disquiet at the prospect of the sale with the Singaporean government’s large shareholding further increasing fears of foreign acquisition of a national asset. Joe Hockey, Australian shadow treasurer, professed concerns at a ‘major regional competitor...buying out our main stock exchange’ whilst Green Party leader Bob Brown was unsettled by the prospect of the Australian Exchange being ‘subjugated to Singapore’.

Despite this dissension in Australia both sides are hopeful that the takeover will go through by the second quarter of 2011.