Submitted by: Submitted by Ricadiao
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Words: 838
Pages: 4
Category: Business and Industry
Date Submitted: 03/26/2011 10:14 PM
Impact of the proposed merger between the SGX and ASX
During last October, Singapore Stock Exchange (SGX) announced an $US8.4 billion offer for all the shares of Australia Securities Exchange (ASX). This proposed merger should assist Australian business trading in global financial market. This can be translated into the impact of reposition of Australia‟s financial services, the opportunities for diversification, lower cost of capital and increase access to foreign funds especially Asian capital.
Even though Australia has highly skilled workforce and excellent regulatory system, its imports and exports of financial services are still in the lower international level, (Ralston 2010). The ASX-SGX creates an international exchange group in Asia-Pacific, and also promoting Australia as a financial services hub in this area. According to the report by Access Economics Pty Ltd, the total market capitalisation of US$1,743 billion places the combined group in the 8th between 10 of the major international exchanges (Access Economics Pty Ltd 2010, p22). The fact shows that the integration basically upgrades the level of Australia‟s financial services sector in Asia-Pacific region, and also improves the international connectedness of it. The impacts on Australian economy will be discussed in the following.
Firstly, the merger of ASX and SGX will allow Australian firms to list and trade on both exchange markets which indicate that a broader diversification benefits are offered to Australian savers and investors. ASX-SGX builds a conduit between the two exchange groups and it will make it easier for both Australian and Asian investors diversify the opportunities beyond their domestic markets (Access Economics Pty Ltd 2010, p28). The diversification potentially lowers the market risk premium and finally lowers the cost of capital. The second way to lower the cost of capital is through reduced transaction costs. The reduction of transaction cost may due to improved...