Managers bearish on ASX/Singapore Exchange merger

The Singapore Exchange’s proposed acquisition of ASX Limited, which runs the Australian Securities Exchange (ASX), is unlikely to go through because of a difficult political environment in Australia, according to Treasury Group fund managers.

Speaking at a media briefing in Sydney yesterday, Hugh Giddy of Investor Mutual Limited, Frank Villante of Celeste Funds Management and Craig Connelly of AR Capital Management all agreed that the deal was unlikely to go through.

Giddy said a merger of the exchanges would not affect the market too much.

“People are speculating that it will increase liquidity from Asia but I don’t think it will — all the top companies [on the ASX] are global now,” he said, although he added that the deal was a “political hot potato”. “In the political environment generally I think it’s become much more anti-business over the past years,” he said, adding that consumer sentiment had been affected by the global financial crisis and the loss of jobs.

Villante agreed that the political dynamic nationally had changed and the likelihood of the deal going through was “not that great”. He felt that the current Government was likely to make decisions that would cause the least amount of stress for the broader community.

“The probability of the Singapore Exchange taking over the ASX is minimal.”

Connelly asked the question: If the deal were the other way around, would the Singapore authorities allow the ASX to take over its exchange?

“The answer is no,” he said.

He agreed that because of the political situation, the deal was unlikely to go through.

“If you’re objective about it, the ASX is effectively a clearing house. It is actually a very cost-effective clearing house versus the Singapore Exchange,” he said, questioning whether the Singapore Exchange would offer the same cost-effectiveness. He also questioned whether the stocks would benefit, since he felt the Singapore Exchange was not a great exchange in the Asia Pacific region.