Deals: Opposition To ASX Bid Knocks Share Price Down

By Glenn Dyer | More Articles by Glenn Dyer

Political opposition seems to be growing about the proposed $8 billion takeover of the ASX by the Singapore Stock Exchange.

Comments from the Federal Opposition and the Greens saw the ASX share price fall sharply yesterday by more nearly 8% at one stage to a day’s low of $38.18, before a small recovery took them to $39.

They then fell away in late trading to close down 7.4% at $38.67, a loss of $3.08 on the day.

 

In Singapore the price of the SGX fell for a second day, losing 23 Singapore cents to close at $S8.72.

The near 3% fall takes the drop since relisting on Monday to just over 9%.

And Bloomberg reported that JPMorgan Chase & Co., Credit Suisse Group AG and Deutsche Bank cut their investment ratings on Singapore Exchange, "citing regulatory issues, increased debt and ASX’s growth outlook."

The ASX closing price is now more than 15% under the $46.18 value of the Singapore offer price of Monday’s announcement (as set by the SGX share price) and well under the notional $48 valuation based on share prices last Friday.

Federal Treasurer Wayne Swan promised the market integrity of the Australian Stock Exchange would be preserved in the event of a Singaporean takeover.

He told Federal parliament that the regulatory process would ensure any decision respected Australia’s national interest.

"The market integrity of the ASX will be preserved," he said.

A proposal of this type would be subject to "extensive regulatory considerations" under Australia’s foreign investment policy and the Corporations Act.

Mr Swan said the Foreign Investment Review Board would screen the proposal in the "normal way", and advice also would be sought from the Reserve Bank and the Australian Securities and Investments Commission.

Shadow treasurer Joe Hockey led the charge yesterday by questioning whether the merger of the two exchanges was in Australia’s interest.

The Greens also said they held concerns about the benefits of such a move.

"I want to hear from (Treasurer) Wayne Swan why the ASX being taken over by the Singapore Stock Exchange is in our national interest," Mr Hockey said yesterday, according to AAP. He was speaking before Parliament sat.

Mr Hockey said Singapore was Australia’s competitor for financial services jobs.

"It (the ASX) is effectively a monopoly," he said. "It is iconic for Australia," he told the Seven Network.

"We’ve got to consider carefully, when a monopoly in the Australian market is being bought out by an overseas interest, whether that is in our interest."

The Greens raised questions about Singapore’s human rights record and said they also had strong concerns about Singapore Exchange’s planned takeover of Australia’s ASX and might oppose the deal in parliament.

"The Greens will not support any move to exempt the 15 per cent shareholder cap on the Australian stock exchange to allow it to be taken over by the Singapore Exchange unless the benefits can be clearly proven," Greens Leader Bob Brown told Reuters.

"We want to know what the impact will be not only on the Australian market and shareholders but also superannuation accounts and financial service and other workers," Brown said.

For the deal to succeed, Australia’s Parliament needs to remove a 15% shareholder cap on ASX.

That is in addition to the approval needed from the Foreign Investment Review Board.

AAP reported that Mr Brown said he did not believe the $8 billion bid for the ASX would be in the country’s national interest.

A 30-year-old remark made by former prime minister Lee Kuan Yew that Australia was the "poor white trash of Asia", as well as the execution of convicted Australian drug trafficker Van Nguyen, demonstrated Singaporean authorities’ dim view of the country and its assets, he said.

"We don’t see an advantage for this nation in having that stock exchange being controlled from Singapore, particularly where there is such a big controlling – and I use the word controlling outside the number of shares – interest from the Singaporean authorities," Senator Brown reportedly said.

Glenn Dyer

About Glenn Dyer

Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.

View more articles by Glenn Dyer →