Money

Singapore-Aussie bourse deal 'challenges' HK

By Hanny Wan (China Daily)
Updated: 2010-10-28 13:59

A floor trader checks his phone at the Hong Kong Stock Exchange. [Photo / Provided to China Daily]

HONG KONG - A merger between Singapore Exchange Ltd and ASX Ltd will make it harder for Hong Kong to win offerings by commodity companies and achieve an expansion plan announced this year, the chairman of the Hong Kong bourse said.

Should the Australian and Singaporean bourses merge, they will list a combined $484.8 billion of mining, chemical and energy companies, more than the $390 billion offered by Hong Kong Exchanges & Clearing Ltd, according to data from the three companies. Getting overseas resource producers to list is a key part of Hong Kong Exchanges' Chief Executive Charles Li's three-year plan announced in March.

"Competition always makes the objective tougher to attain," Ronald Arculli, chairman of Asia's third-biggest bourse, said in an interview in Hong Kong. "Hopefully, we'll be able to build up some sort of critical mass."

IPOs by basic materials and energy companies reached $24.2 billion globally this year, almost triple the amount raised in 2009, spurring competition between bourses. Hong Kong this year showed its intent to seize more of the market after United Co Rusal, the world's biggest aluminum producer, became the city's first Russian listing.

Related readings:  HKEx has no plans to merge  HKEx failure to develop dark pool trading could be costly  HKEx's Q2 profit drops 16.4%  Hong Kong equity issuance is expected to return to 2007 levels

Singapore Exchange offered about A$8 billion ($7.9 billion) in cash and stock on Monday for ASX in a drive to compete with Hong Kong and Tokyo. The combined entity would oversee two separate exchanges hosting mining companies BHP Billiton Ltd and Rio Tinto Group in Sydney and Wilmar International Ltd in Singapore.

"Singapore and Australia stand out stronger as they have more resources companies, and their combination creates synergy," Danny Yan, Hong Kong-based fund manager at Taifook Asset Management, which oversees about $400 million, said. "In terms of mining capital, Hong Kong stock exchange may not win."

As many as 15 mining and natural resources companies may sell shares in Hong Kong in the next 12 months, according to a PricewaterhouseCoopers Ltd statement on Tuesday.

Hong Kong Exchanges' Arculli said the bourse will probably look "at a broader range" of resource companies, and not concentrate on one market or one country. "Our objectives remain unchanged," he said on Tuesday. "It might mean that we have to work a little bit harder. We are a latecomer to this particular sector, but so far, we've done reasonably well."

"There are still lots of uncertainties," said Geoff Lewis, Hong Kong-based head of investment services at JPMorgan Asset Management. "They still need regulatory approval. It will be going on for a long time."