ASX-SGX Merger: What Should Matter?


Currently, the Australian government is considering the merits of a proposed takeover by the Singapore Exchange Limited (SGX) of the Australian Stock Exchange (ASX). The over-$8 billion deal has the goal of creating a dominant force in the Asian-Pacific region and a globally-salient exchange. In fact, the merged exchange would “create the world’s fifth-largest market operator by share value.”  The discussion should be focused on the viability of the merger, especially the potential impact on investors, the region, and the world. Debates about the pros and cons would seemingly be productive to decide whether or not the deal would be the right path to take in regards to the ASX, an exchange that some say would become “irrelevant” without merging with SGX. The talks since the merger was proposed have devolved however to the levels of political infighting. In the current scrum of the Australian Parliament, a few themes have emerged as the hot issues, specifically: Singapore’s human rights record, the breakdowns of representation and ownership of ASX-SGX exchange, and Australian national interest. In deciding whether to combine exchanges should these concerns play a dominant role in evaluation and discussion over the raw data on the viability and projections for the combined exchanges?

Senator Brown from Australia’s Green Party has said “[Singapore] is a state that tramples all over freedom of speech, democracy, the rights of oppositions, the ability for public discourse…It is a classic rule by the oligarchs of Singapore.” As a result, Brown and his party plan to oppose the merging of ASX and SGX. According to, a watchdog organization focused on international civil and political rights, Singapore is a “partly free” state that still struggles to afford full political and civil liberties to its citizens living under the ruling authoritarian People’s Action Party. While full human rights are important for Singapore’s citizens, “Singapore has traditionally been lauded for its relative lack of corruption”, an issue that should be at the forefront of the Australian Parliament’s mind when considering this merger. In fact, Singapore was ranked 3 out of 180 countries in Transparency International’s 2009 Corruption Perceptions Index. While it is commendable that Australian politicians are willing to consider the human rights record of other countries before embarking on business ventures with them, it seems like concerns over Singapore’s human rights record may be a façade. Arguably the most important civil and political liberties issue to consider before agreeing to a momentous business deal such as the ASX-SGX merger is corruption, but this seems to be left out of the discourse. It is admirable to care about Singapore’s human rights record, but this issue should not be a controlling factor in deciding whether to merge the two exchanges. If human rights and civil and political liberties are going to be included in the discussion, maybe it is beneficial to focus on issues within this subtopic most relevant to business, including Singapore’s excellent corruption record.

Another significant concern for many Australians is the level of control Singapore and the SGX would have over the merged exchanges. Not only has it been reported that SGX was willing to pay a premium price for ASX, but also that “the CEO would be SGX’s current chief Magnus Bocker and the 15 member board would only feature four Australia-based directors.” As a result much of the power for the merged exchanges would be consolidated in Singapore and this merger seems to look more and more like an acquisition. As Tracy Lee and Andrew Main explain in their article on the deal, it is especially worrisome that the Singaporean government currently owns a 23% stake in SGX through Temasek Holdings, a government investment company. While that percentage is expected to be reduced to 14.9% in the merged exchange, the percentage ownership coupled with the control of the board and the inflated offering price seem to leave the ASX and Australians in the dust in terms of governance, regulation, and authority in the merged exchange. Before a decision on this potential deal is made, serious questions should be asked about Australian representation in terms of authority and ownership of the merged exchange. The ASX is considered a “national treasure” and before this merger moves forward, Australians should maintain some control over the exchange regardless of its purchase price.

Along the same vein, however, how big of a role should national interest play in determining whether to accept or reject the ASX-SGX merger deal? While national interest means that Australians should continue to have a decisive governing and regulatory role over any new iterations of the ASX, national pride has little place in determining the future of this exchange. Many politicians, including the Green Party’s Senator Brown, have sworn to block the deal on the basis of national interest.  They conflate national interest with national pride.  According to Australian Treasurer Wayne Swan, the proposal will undergo a “national interest test.” However, ASX chief executive, Robert Elstone, does not understand “how this [merger] is contrary to the national interest, [since] the combined exchange will be both more regionally relevant and globally relevant than the sum of its parts.” It is debatable whether or not the merged exchange would be inherently good, as Mr. Elstone says it would be, not only for the ASX and Australia but also for the SGX. This should be the main question for the Australian Parliament, however, in deciding whether or not to approve the merger. National pride, while understandable for something such as a national stock exchange, should not necessarily be affected by (or conversely affect) the merger. The ASX will still exist when all is said and done regardless of whether the merger goes through or not and Australians will still have the same access to the exchange they had in the past (possibly even better access to Asian investment products as a result of the merger). Any sort of discussion based on nostalgia or national pride is irrelevant and can only limit Australia from promising opportunities. For the Australian Parliament, the main question should be whether or not the ASX-SGX merger will actually be beneficial to the ASX and Australian investors, and other factors should be judged in light of this main issue.