The proposed merger between the Australian Stock Exchange and Singapore Exchange was a hot topic of debate at today's In the Zone Business Forum at The University of Western Australia.
Mr Magnus Böcker, Chief Executive Officer, Singapore Exchange, and Professor Ray da Silva Rosa, Head of Accounting and Finance, The University of Western Australia Business School, debated the merger.
Mr Böcker said that for a region such as Western Australia, there were many benefits in creating cross-border corporations, but significant risks in markets not being able to support small to medium-sized companies.
He highlighted the strong economic growth in the Asian region, where a merged exchange would be the fifth largest in the world and the second largest in the Asian Pacific region.
"In less than 10 years over 55 per cent of world's financial markets will be in the zone," Mr Böcker said, adding that one-third of the world's market capitalisation is in the region, while in 2010 more than half of all money raised through Initial Public Offerings was in the zone.
He said global capital markets needed to become more efficient and competitive.
However Professor da Silva Rosa described Singapore as a "nanny market economy" and the proposed takeover of the ASX as "the latest remarkable outcome of the East Asian view that markets work best when piloted by governments".
He voiced concerns about the role of regulators in the proposed merger, and the ability of Australian regulators to intervene in a timely fashion when required, as they did during the Global Financial Crisis.
"Regulation is not neutral," he said. "What happens in times of crisis if what is thought to be intervention in Australian interests is not considered appropriate to Singapore interests?"
Professor da Silva Rosa said that local sentiment was an important factor in buoyant markets.
He said that the proposed merger was unlikely to be the last step in the process. "It is likely that the fifth largest exchange in the world would be the target of a bid from a larger exchange," he said, stating that a key issue would then be Australia's role in subsequent negotiations.
Mr Böcker suggested that Australia could not expect to sell an entity and have complete influence.
Also on the panel for the session entitled "Regional Capital Centres: Sovereignty, Competition and Risk", The Hon. Dr Philippa Malmgren, President of Canonbury Group, said global markets were being affected by inflation, which in emerging markets would result in instability.
Dr Malmgren predicted volatility lay ahead in markets where growth was not being sustained and inflation was increasing.
The In the Zone forum is an intensive one-day meeting of 100 national and international leaders from the business, government and academic sectors.
With the theme ‘The Geography of Global Prosperity', the forum provides an opportunity for discussion and debate about the increasingly complex global neighbourhood and key policy questions facing Australia and the region.
The forum follows the success of the 2009 In the Zone Conference.
Sonia Nolan (ITZ Media Manager) (+61 4) 01 034 103
Janine MacDonald (UWA Public Affairs) (+61 8) 6488 5563 / (+61 4) 32 637 716