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September 26, 2017

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Singapore's bid to buy stock exchange stings Australia's prestige

SYDNEY -- How deliciously awkward it would be for the Singapore government if the tables were turned and the Australian Securities Exchange Ltd (ASX) put in a bid for control of the island republic's only stock exchange.

It is almost inconceivable that the ASX could raise the billions needed to buy up Singapore Exchange Ltd and so such imaginings are academic.

"Australia relies on massive Asian savings. We live beyond our means," said shareholder activist Stephen Mayne.

He notes that the Singapore government already owns chunks of corporate Australia worth about AU$30 billion (US$29 billion) — a sum higher than the value of the commercial assets held by the Australian government itself.

If the Singapore Exchange were successful in its friendly AU$8.4-billion takeover bid for the ASX, Singapore's holdings in Australia would top AU$50 billion and include the nation's second-biggest telephone company and the exchange it is listed on.

It is not a done deal. Holding out hoops to jump through will be the Foreign Investment Review Board, the Australian Securities and Investments Commission, the Reserve Bank, the Australian Competition and Consumer Commission as well as the government and parliament itself.

Parliament, in which neither of the major parties has a majority, could prove the stumbling block.

"We shouldn't see it simply as a purchase of another company," Greens leader Bob Brown said, vowing to oppose the takeover. "To put that into Singaporean hands isn't a thing that should be undertaken lightly."

The objectors include ultra-nationalists who fret at any perceived loss of sovereignty as well as more reasoned commentators who see the thick-walleted Singapore Exchange out to crush a competitor in the regional funds management business.

The bid is certainly a blow to the ambitions of Sydney to vie with Hong Kong and Singapore as an Asia-Pacific money-go-round. Agreeing would be tantamount to accepting that Sydney had dropped out of the race.

A genuine worry is that Singapore ownership will see money managers shift to Singapore to be closest to the action. There are fears that primary listings will also shift. Those backing the deal see it as the first push in an Asia-Pacific consolidation that will see lots of other mergers.

"It's fine to be nostalgic, to talk about holding on to the farm, but the ASX can't stand still," said former ASX chief Maurice Newman.

He agrees with Singapore Exchange chief executive Magnus Bocker, who warned that second-tier bourses in the region like Singapore and Sydney could be trampled by exchanges in Hong Kong and Shanghai unless they too put on muscle.

"This is a question of not just creating new opportunities but staying relevant in rapidly changing markets," Bocker said.

His view that the takeover should be about survivability rather than sovereignty was backed up by ASX chief Rob Elstone, who said combining to become the world's fifth-largest exchange was the primary goal — rather than one exchange canceling out the other or just cost-saving.

While some in Australia railed against foreign domination, voices in Hong Kong and Tokyo corroborate the storyline from Bocker and Elstone.

Tokyo Stock Exchange (TSE) chief Atsushi Saito worried that the merger would flag off a race to consolidate.

"If Japan becomes isolated on the international stage, that's not good," he said.

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