NZX chief upbeat as ASX takeover deal clears hurdle

NZX head Mark Weldon. Photo / Mark Mitchell

The proposed takeover of Australia's main stock exchange by the Singapore Exchange opens up opportunities for the NZX, says its chief executive, as the deal leapt another regulatory hurdle yesterday.

In a statement yesterday the Australian Competition and Consumer Commission (ACCC) said the deal wouldn't adversely affect competition in exchange services.

NZX head Mark Weldon said the merger was a "big positive" for the local exchange.

Weldon said exchange mergers created opportunities for specialist players and both Australia and South-east Asia were areas in which the NZX could become a specialist.

"We're not sure what the nature of the opportunity would be but we'd be pretty confident with a larger, more distant owner opportunities would appear," Weldon said.

Weldon said Singaporean ownership of the ASX would give the NZX the confidence it would get "an equal whack at every cherry" in Australia.

A plan to establish a high-speed, low-cost equities platform, the AXE, had sat for three years in Canberra without getting its market licence approved or rejected, said Weldon. The merger deal gave the NZX a greater confidence there would be a level playing field.

A focus of the ACCC's investigation was whether the acquisition of ASX would deter the entry of rival Chi-X Australia into the Australian market due to Singapore Exchange's links with Chi-X Global, it said.

The bid still needs clearance from the Foreign Investment Review Board, Reserve Bank of Australia and Australian Securities and Investments Commission, while some lawmakers have raised national-interest concerns.

"The ACCC approval is clearly a necessary ingredient," said Angus Gluskie at White Funds Management in Sydney. "Nevertheless, the outcome appears to have been expected, with investors more concerned about the other hurdles."

Shares in the ASX closed steady at A$38.50 yesterday.

Singapore Exchange offered to buy ASX in October for A$8.4 billion ($11.2 billion) in a cash and share deal that would create the world's fifth-largest listed exchange company.

"Clearance from the ACCC is a move in the right direction, but realistically there is a lot more water to pass under the bridge before investors will get too excited," said Tim Schroeders, at Pengana Capital in Melbourne. "This is one of many hurdles that need to be cleared."

Weldon said it was unlikely the market merger would see New Zealand companies jumping ship.

He said the NZX's larger listed companies, the likes of Fletcher Building, SkyCity and Infratil, would go from having significant research coverage and index representation to not even featuring in the top companies of the merged exchanges.

Weldon said New Zealand companies could end up with the "miserable liquidity" of small companies listed on the Nasdaq.

"For small companies big is not always better and pretty much every company in New Zealand is on the smaller side of the global scale."