Introduction
Singapore exchange, as one of the largest, and one of the most influential companies in Pacific region, may be regarded as a tasty morsel for Australian Exchange Securities. In general, such mergers are often regarded as an opportunity to increase influence in a particular geographic region, on the other hand, these actions may be opposed by anti-monopolist organizations. This is the first merger between operators of the Asia-Pacific region, therefore, it is hard to assess the consequences of this action. On the other hand, the actual importance of this merger may be explained by the fact that this may help attract additional investment to Australian market, however, some researchers consider that this is the only benefit.
Market Analysis
All the benefits and disadvantages of the merger may be considered after a thorough analysis of both stock markets. Maurice Newman – a former chairman of ASX claims that Australian investors have nothing to be afraid of, and there are not reasons for worrying, as the deal is performed after thorough analysis of the market situation, and is intended for protecting the interests of both companies, and their customers. He also emphasized that the benefits of this merger for Australian investors are explained by the fact that Singapore Stock market is filled with numerous Chinese stocks and that will open additional opportunities for investors of the Green Continent. Magnus Bocker – SGX chief, and CEO of the united company emphasizes that this merger will promote stabilization of both stock markets, while stabilization will be regarded as the necessary basis for further economic growth. In accordance with the analysis performed by The Wall Street Journal, this merger will be able to create a $1.91 trillion joint stock market.
Discussion
Since the announce of ASX and SGX merger, economist from both sides are interested with the question: how each side will be able to benefit. It is evident that Australian stock market is larger, and SGX gets more opportunities for investment. The question of how Australian market will be able to benefit stays open. Both companies emphasize the fact that their merger is intended for increasing the loyalty of their customers, offer them more financial opportunities, and make capital investment practices cleaner, more transparent, and comfortable by creating the expanded platforms, and uniting two influential drivers of Asia-Pacific stock market.
As it is emphasized by Caskey (2011), the merger itself is beneficial for both sides, and considering the fact that decision for merger is mutual, the benefits of the Australian side will be closely linked with the access to additional investment opportunities. As Caskey (2011, p. 451) emphasized:
This combination will bring together the complementary businesses of two successful exchanges in the Asian time zone, with internationally recognised regulatory standards. The combination leverages the strengths of ASX through its listings, stock options and fixed income franchises, with SGX, the Asian gateway for international listings, equity futures and OTC clearing, to create the region’s pre-eminent exchange group.
In the light of this statement, it should be emphasized that this unification will help to expand the activity of Australian investors by unifying two stock regions. Venture capitalists will have an opportunity to invest into South Asian stock market. The benefits of both companies are based on the statement that such a unification will help to stabilize their funds, which will offer a better protection for investors, and increase competitiveness of both organizations on global market.
From the point of view of an Australian investor, such a merger creates the necessary platform for increasing capital stability, as well as managing capital risks associated with the risks on Asian Pacific stock market. However, deeper research of the matter of merger helped to reveal the fact that benefits are quite subjective, as this merger may be beneficial for communication, and information spheres, while other spheres of Australian business will not be expanded. In fact, the SGX company is not able to offer equal opportunities for all the investors, as Stock Market in Singapore is smaller in comparison with Australian (Pacific Rim: Link Me Up, 2010), therefore, airline business, car manufacturing sphere, and some representatives of banking industry will not benefit from this merger. Additionally, this will help to achieve a sufficient level of financial operational efficiency. This will be helpful for investing into IT sphere, as this sphere requires high efficiency for successful investment development.
It is generally considered that Australian stock market is the most isolated in comparison with others. Stock market of Singapore is involved into the Asian markets, hence, it is the integral part of the global market system. Hence, Australian stock market will have an opportunity to expand the geographic sphere of its influence by getting involved into the global market system. On the one hand, this is featured with numerous investment opportunities (contracts, cooperation activities, experience exchange), on the other hand, Australian market may become more vulnerable to global stock market shocks and crises. However, if Australian investors are experienced enough, deeper involvement into the global financial structures will help predict crises, and undertake the necessary protection measures. Anyway, globalizations is mainly featured with advantages then disasters and difficulties.
It is emphasized by Goetz (2010), that Singapore stock market is better structured in comparison with Australian one. Better structuring means better risk management, better financial flow, and better protection from market instabilities. Therefore, the merger will be an excellent opportunity for Australian investors to apply the experience of Singaporean investors in structuring stock market activities. This will be crucial for further expansions, as well as better risk management.
In accordance with thee marketing research by Goetz (2010), it should be emphasized that the regarded merger will be the necessary step for product diversification, and this will help to create cross-access perspectives for the participants of both stock markets. Hence, this will inevitably increase the liquidity pool for the investable funds available for both markets. As Caskey (2011, p. 456) states:
The combined group will be able to harness an expanded and compatible reservoir of skills to further develop and grow the Australian and Singapore markets. The combined group will also enhance its attractiveness as a partner of choice for future exchange industry collaboration and consolidation opportunities to tap into strong regional growth.
The importance of the increased attractiveness for external investors means the opening of the access for additional funds and investments. Avalanche of offers and trades is not forecasted, as this will require some time for the joint market adjusted its work, and gained maximal effectiveness. Regardless of the fact that such mergers is a common thing in investment sphere, some investors are quite skeptical, though most forecasts are favorable.
Reference List
Caskey, J. P. (2011). ASX SFX Merge: Adapting to Survive in Changing Markets. Business Review, 78(3), 451.
Goetz, J. (2010). A Dissent Dampened by Timing: How the Stock Market Exception Systematically Deprives Public Shareholders of Fair Value. Fordham Journal of Corporate & Financial Law, 15(3), 771.
Pacific Rim: Link Me Up. (2010). Futures, 31, 14.