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The takeover of ASX by Singapore Exchange has ignited merger-and-acquisition speculation in other Asian markets.
Investors punished Singapore Exchange, driving its stock down by the most in two years yesterday, for agreeing to pay A$8.4 billion ($10.8 billion) for Australia’s main bourse. Hong Kong Exchanges & Clearing, which manages Asia’s No. 3 stock market, yesterday climbed to the highest level since January 2008 and Bursa Malaysia Bhd. jumped the most since March. All three exchanges fell at least 1.3% today.
Investors punished Singapore Exchange, driving its stock down by the most in two years yesterday, for agreeing to pay A$8.4 billion ($10.8 billion) for Australia’s main bourse. Hong Kong Exchanges & Clearing, which manages Asia’s No. 3 stock market, yesterday climbed to the highest level since January 2008 and Bursa Malaysia Bhd. jumped the most since March. All three exchanges fell at least 1.3% today.
Rising competition from electronic venues and investor demands to cut trading costs have driven at least US$68 billion ($88 billion) in acquisitions among global exchanges since January 2007, including NYSE Group Inc.’s purchase of Euronext NV and Nasdaq Stock Market Inc.’s takeover of OMX AB, according to data compiled by Bloomberg. The Hong Kong and Malaysian bourses said yesterday they would consider alliances.
“The proposed consolidation between ASX and SGX may draw greater investor attention to Asia, and we would leverage on this opportunity to promote our strengths,” Bursa Malaysia Chief Executive Officer Yusli Mohamed Yusoff wrote in an e-mail. “Any regional efforts by other players that will increase interest of investors to the Asian markets will be looked upon as an opportunity for other exchanges.”
HONG KONG
Hong Kong Exchanges, whose companies have a total market value of US$2.6 trillion and range from HSBC Holdings Plc to China Mobile, jumped 4.9% to HK$181.90 ($30.3) on Oct. 25. Shares of the bourse slipped 1.3% to HK$179.50 as of today’s 12:30 p.m. trading break in Hong Kong.
Hong Kong Exchanges signed information-sharing agreements with the Hanoi Stock Exchange and the Korea Exchange this year. The bourse has a market value of US$25.3 billion and trades at 37 times estimated profit, the most expensive level since at least September 2009.
“Although Hong Kong Exchanges has not identified any significant synergistic opportunities, it is open to possible cooperation,” spokesman Henry Law wrote in an e-mail yesterday.
Bursa Malaysia, which runs the second-largest stock market in Southeast Asia after its neighbor Singapore, jumped 4.6% to 8.62 ringgit ($3.60) yesterday. The shares pared gains today, losing 1.5% to 8.49 ringgit. The company has a market value of US$1.48 billion, or 33 times projected profit. It oversees a US$371.4 billion stock market that is home to Genting Bhd., Asia’s third-biggest listed casino operator.
The Taiwan Stock Exchange will “cooperate with other bourses in specific areas such as technical expertise,” Michael Lin, a senior vice president, said by phone from Taipei yesterday. The bourse is unlikely to seek overseas mergers in the “near term,” he said.
ASIA IN DEMAND
“A further wave of M&A will happen over time, but it will be a much slower pace,” said Christopher Allen, a New York- based analyst with Ticonderoga Securities LLC. “You look at all the U.S.-based exchanges, they all want exposure to Asia. It’s a fast-growing marketplace.”
Acquisitions often fail to boost value for owners. Shares of 53 companies that made the biggest purchases in the last mergers-and-acquisitions boom from 2005 to 2008 lagged behind industry peers two years later, according to data compiled by Bloomberg’s ranking group. NYSE shares have tumbled 62% since March 2006 as it snapped up companies from Euronext to American Stock Exchange and Archipelago Holdings Inc.
‘REGULARTORY HURDLES’
Singapore Exchange offered cash and stock for ASX to create a company that will fend off rising competition. The bid values ASX at A$46.18 per share or A$8.09 billion, based on Singapore Exchange’s closing stock price yesterday. That represents a premium of 32% more than the last traded price of ASX on Oct. 22. Both companies are confident they will win regulators’ approval, ASX Chief Executive Officer Robert Elstone said yesterday.
Shares of ASX surged 19% to A$41.75, closing below the projected offer price, on Oct. 25. The stock tumbled today, losing 7.4% to A$38.67 for the biggest slump since February 2009. A possible hurdle could be a 15% ownership limit of Australian companies by foreign governments, given that Singapore owns a 23.5%, non-voting stake in its exchange, Credit Suisse Group AG analysts wrote in a report dated Oct. 26.
“The issue for additional mergers in Asia is the regulatory hurdles,” Paul Zubulake, senior analyst at Boston- based research firm Aite Group LLC, wrote in an e-mail. “Will the countries internal regulators approve foreign ownership?”
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