SGX-ASX MERGER: Backlash threatens SGX deal
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Oct 26, 2010
SYDNEY - A PLANNED multi-billion dollar merger of the Sydney and Singapore stock exchanges faced a fierce political backlash on Tuesday, as a senior Treasury official warned the deal also posed 'regulatory issues'.
Greens leader Bob Brown, a key ally of Australia's fragile ruling coalition, expressed strong opposition over Singapore's 'appalling' rights record, while a maverick cross-bencher said he didn't want to live in a country of 'serfs'.
The vocal objections raised further questions over the US$8.2 (S$10.7 billion) US dollar merger, which needs approval by both Singapore and Australia, where it must overcome a number of hurdles. The move, scheduled to complete in mid-2011, aims to create the world's fifth biggest exchange with a market capitalisation of about US$12.3 billion as a regional trading hub to rival Hong Kong, Shanghai and Tokyo.
The deal will be studied by Australia's securities, foreign investment and competition watchdogs, as well as the central bank, and must be approved by Treasurer Wayne Swan.
Parliament - where Prime Minister Julia Gillard holds just a one-vote majority in the lower house - will then have to vote on amending the Corporations Act to allow ownership of more than 15 percent in the ASX bourse.
Analysts say one significant hurdle could be the Singapore government's large stake in the SGX bourse, which could raise sovereign ownership concerns. Jim Murphy, markets executive for the Treasury, said officials were yet to receive submissions and it was too early to comment on whether it could be approved. 'There are a number of regulatory issues that need to be worked through,' he said.
-- AFP
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MPs line up to oppose ASX merger
The proposed merger between the ASX and Singapore's stock exchange is already under threat after a wide range of non-Labor MPs expressed opposition to the deal.
The planned tie-up must not only be reviewed by several regulatory agencies, but will also need to be approved by the Federal Government and the finely balanced Australian Parliament.
Independent MP Bob Katter was quick in declaring his opposition to the merger.
"I intend - I'm determined - to tenaciously oppose it, and I expect that all of the crossbenchers, every single one of us on the crossbenches, will be doing the same thing," he said.
Greens leader Bob Brown also came out against the planned deal, citing the Singaporean government's significant stake in the stock exchange, and the nation's poor human rights record as reasons to reject the merger.
"The Singapore government put the phone down and hung Nguyen Van with no further compassion or consideration of Australia's opposition to the death penalty," he told reporters.
"Now the phone's ringing in the opposite direction to have the Singapore stock exchange - with a 15 per cent government interest, I might add - take over the Australian Stock Exchange in Sydney. We should tell them, 'nothing doing'."
The two exchanges have done substantial work to get the deal to this stage, but comments from senior Coalition politicians show they may be facing their toughest hurdle: securing the votes they will need to have the merger approved by the Federal Parliament.
The Nationals' Senator Barnaby Joyce says he is concerned about the potential impact on Sydney's status as a regional financial hub, given that the merged company will be run from Singapore.
"Obviously, in the discussion, people in the town of Sydney will have some clear questions to ask about if there's a removal of the commerce that's involved with the Stock Exchange to another country, with the removal of the merchant banks with it, where does that leave Sydney?"
The Coalition's shadow treasurer, Joe Hockey, says it is up to Wayne Swan to explain how it is in Australia's national interest for the ASX to be controlled by a Singaporean company.
"We welcome investment, but we also have to make decisions about a monopoly," he said.
"I mean, the ASX is effectively a monopoly and, therefore, as a monopoly, is it in our national interest to have, not only a foreign exchange own it, but a foreign exchange with a substantial shareholding from its own government."
However, the Treasurer says it is a matter for the regulators at this stage, not the Government - and there are plenty of regulators who will be scrutinising the deal.
The Foreign Investment Review Board, the Australian Securities and Investments Commission, the Reserve Bank and the Australian Competition and Consumer Commission will all be having a look.
If they recommend approval, it will then fall to Treasurer Wayne Swan and the Government to decide whether to sign-off.
Even if Mr Swan gives the green light, the Parliament will have to approve a change in regulations in the Corporations Act to allow the deal to proceed, because there is currently a 15 per cent limit on the stake any one party can hold in the ASX.
That is no fait accompli given the fragile numbers in both the House and the Senate and the hostility expressed towards the planned merger by many MPs.
Mr Swan has told Parliament the Government will make sure the deal is in the national interest.
"Australia rigorously applies a national interest test, in foreign government investment and significant private sector investment, and of course this particularly applies to a proposal of this scale and this importance," he said.
Regulatory risk
The head of the Stockbrokers' Association, David Horsfield, says that is why ASX shares are trading so far below the offer price of around $48 a share.
"It's the regulatory risk that people are building into the share price at the moment," he said.
But he says the deal does seem to offer significant benefits to both exchanges.
"There's no doubt that the cost efficiencies by the two exchanges coming together seem to be quite significant."
Share analyst Andrew Hills from Wilson HTM says the deal is attractive to ASX shareholders.
"It's a fantastic deal for ASX shareholders. I mean, the premium of this transaction values ASX at a 37 per cent premium to its previous close," he explained.
However, he says the real benefit to shareholders is much lower, because the company would be taxed in Singapore and unable to give franked dividends.
"Current ASX shareholders will not receive franking credits in the merged company, so that reduces the premium by about 20 per cent or so, depending on how you value franking credits," he added.
Investors seem to have cottoned onto that, with ASX shares trading at $39.48 by 1:27pm (AEDT), after hitting highs of almost $44 yesterday.
ASX shares had dipped even lower this morning, to $38.18 by 12:17pm, after the comments by Senator Brown and other MPs.
Investors also seem to think Singapore's exchange is overpaying, with its shares falling around 6 per cent yesterday, and another 2 per cent today.
- ABC News
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I really dont understand the impact.
Can Clive explain in layman's term?
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Originally posted by likeyou:
I really dont understand the impact.
Can Clive explain in layman's term?
Oz won't want foreigners to collect fees in her trading place.
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You mean merge together with aust trading and sgx?
Sorry bro, me no nothing, just kpo want to know what's up.
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Originally posted by likeyou:
You mean merge together with aust trading and sgx?
Sorry bro, me no nothing, just kpo want to know what's up.
2 different exchanges; one owner.
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Originally posted by Clivebenss:
2 different exchanges; one owner.
but the timing is different. Spore 2 hours behind right? -
i don't know much about Aust domestics economy....but personally i would like the merger to go thru for several reasons.....
Australia should asked this question....Would they like to see SGX be bought over by rising China HSX. Australia would see that they are once again facing the geopolitics of a single power dominating S.E.A........
The merger would help move Singapore further south and financially least influence by rising China. -- An Example..... Given recent dispute between Japan and China...China is holding Japan hostage by limiting Rare Earth Export.
The reality of our region remain unchanged since WWII be it military or economics expansion.
2nd reason why i hope the merger is successful it would help to channel the surge inflow of foreign funds into both Exchange and park their funds in investment in financial instruments rather than Property and loans.
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Falls through.
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Originally posted by Clivebenss:
Oz won't want foreigners to collect fees in her trading place.
more like those ang moh's cannot stand being owned by Chinese.... -
the merger bid will face a lot of political infighting among Aussies if it went through forcefully...there are seemingly too many obstacles and differences to overcome and not just pure investment ambitions...this would hilt badly against the new Aussie PM position, and another wave of Aussie political leadership would affect the new deal...looking further....not only losing money in the end, we may have to leave with disgrace and strained bilateral relationships between the two countries....
of course, and unless you have great majority Aussie's support to think otherwise other than bruised ego to the takeover....
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Aussies more conservatie....
American and UK anything also sell.. football clubs... anything you want it you name it.. you got cash... its all yours....
If I didnt remember wrongly.... Aussie stopped China from buying away its coal mines... -
Originally posted by Junyang700:
Aussies more conservatie....
American and UK anything also sell.. football clubs... anything you want it you name it.. you got cash... its all yours....
If I didnt remember wrongly.... Aussie stopped China from buying away its coal mines...
that's call ego lah.. -
Originally posted by I-like-flings(m):
that's call ego lah..Not really... Apart from ego, I also think they have in mind some national interests in it...
Unlike US.. they are selling too much of their bonds to China and Japan.... Already both countries if combined together can have the power to cripple their economy.... -
Originally posted by Junyang700:
Not really... Apart from ego, I also think they have in mind some national interests in it...
Unlike US.. they are selling too much of their bonds to China and Japan.... Already both countries if combined together can have the power to cripple their economy....
national interests? pls lah u thnk they are japanese ar? there are australian ar... they think about nothing beside themselves -
It really takes many many months to put things right across the table talks/meetings.
Anyway, sgx will not lost anything if the merger falls through.
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hopefully this merger will drive to drive STI to greater heights in 2011.
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Originally posted by I-like-flings(m):
national interests? pls lah u thnk they are japanese ar? there are australian ar... they think about nothing beside themselves..... : )
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oz mentality isnt ready...spore isnt ready too.
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If oz govt strongly oppose, then better let them settle their internal problems themselves first before starting to talk about merger with sgx. Btw, who got power for oz stock exchange? Seem like not the oz govt.
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Originally posted by likeyou:
If oz govt strongly oppose, then better let them settle their internal problems themselves first before starting to talk about merger with sgx. Btw, who got power for oz stock exchange? Seem like not the oz govt.
U think ASX is like SGX everything own by SG govt?
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If the deal goes thru, it's good for the long term, but need to check out the purchase price.
If the deal fails, then SGX price will bounce back to it's pre-merger announcement levels.
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Originally posted by kilfer:
If the deal goes thru, it's good for the long term, but need to check out the purchase price.
If the deal fails, then SGX price will bounce back to it's pre-merger announcement levels.
maybe will merge with India.... -
Originally posted by Arapahoe:
maybe will merge with India....
ya lor.. merger with india sure better than ASX