ASX Limited is facing increased scrutiny as MST Marquee advises clients to short the stock, citing high valuation, regulatory risks, and a shrinking sharemarket. The advisory firm joins hedge fund manager Jun Bei Liu in betting against the market operator. MST initiated its short position in November. MST Marquee is an Australian financial services company offering stockbroking, corporate finance, and research services. ASX Limited operates Australia’s primary securities exchange.
The ASX has been dealing with an Australian Securities and Investments Commission (ASIC) inquiry into governance and operational failures. Earlier this month, an employee incorrectly attributed a market-moving announcement to TPG Telecom, causing its stock to plummet before the trades were cancelled. These issues have contributed to the company’s underperformance, with its shares dropping 2.7 per cent this year, compared to the S&P/ASX 200’s 8.6 per cent gain. The stock’s price-to-earnings ratio is nearly 25 times, with analysts expecting earnings to contract by 2 per cent over the next year.
MST senior analyst Hasan Tevfik highlighted the structural issue of ‘de-equitisation,’ caused by takeovers and a lack of initial public offerings. He criticised the ASX for allowing companies like James Hardie to re-domicile in the US, undermining the benefit of super funds investing with a home bias. Jun Bei Liu’s hedge fund, TenCap, is shorting the ASX due to its ‘super expensive’ shares and the likelihood of further ASIC investigations.
Tevfik suggests the valuation needs to decrease to reflect the company’s quality, ideally a price-to-earnings ratio below 20. MST also warned about the investment required to replace the ASX’s clearing and settlement platform, CHESS. The ASX faced a strike against pay at its annual general meeting last year following the platform’s upgrade failure, leading to $250 million in writedowns and legal action from the corporate regulator.
