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Technically Speaking: ASX and NZSE need to keep eye out on Singapore stock exchange

Friday 29th September 2000

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Chart 1: Australian Stock Exchange

Chart 2: Brierley Investments

A hint of where the Stock Exchange might be headed under the wing of Australian Stock Exchange (chart 1) would find some clues in the latter's annual report. It says that in the short-term most revenue would continue to come from market turnover. Over the past 10 years, trading volumes have increased an average 18.8% a year.

The ASX's customer base continues to grow as more Australians invest. Tax reduction in the form of capital gains tax changes made at the end of last year and the planned abolition of stamp duty in July 2001 will have beneficial effects.

Australia is predicted to have a golden decade of sustainable economic growth ahead and this should increase demand of ASX-listed investments. The only short-term cloud on the horizon is the exchange expects its costs to rise over the coming year.

Strategically, the ASX plans to build market size through offering increased product diversification. It is also concerned to expand its role in the international arena. Over the coming year the strategy will be implemented, presumably including a merger with the NZSE.

By contrast, the NZSE's revenues from market turnover are likely to fall as the wave of mergers, takeovers and overseas relocations continues to strip its listings while local investors have their investment capital clipped by a new 39% top marginal tax rate.

The NZSE has diversified its service range through its new venture capital board but that will not replace the loss of institutional turnover at the large-cap end. If Carter Holt Harvey, for example, is taken over at the end of the year, that loss alone would chop a lot of activity out of the NZSE. Then there are the Fletcher listings to go as well. It will be a skinny market at the top-30 end by late 2001, so to maximise value the NZSE will need to move promptly on merging while it has something to sell.

One sharemarket the ASX and NZSE will have to watch out for is the Singapore Stock Exchange. The SSX was mooted for a while as a possible NZSE partner. Probably both the ASX and NZSE could do with forging alliances with the exchange that has been nicknamed the Nasdaq of Asia.

Singapore is turning itself into a major investment centre at the expense of rival Hong Kong and could eventually become the top equities market in Asia outside Japan. It has going for it the English language, British colonial legal structures and low corruption.

The SSX drew attention when the ill-fated Brierley Investments (chart 2) relisted there. The new market has not helped ailing BIL shares to add value.

At the time it seemed rather exotic to list a New Zealand company in Singapore but now more of our firms are taking that avenue, such as Renaissance Corporation with its Conduit spin-off (NBR, Sept 22). Singapore is now a direct competitor with Australia for share listings.

The Closer Economic Partnership (CEP) treaty with Singapore could prove a useful backdoor for the ASX via the NZSE to find some way to team up with the SSX. The treaty will have some interesting ramifications. The treaty is rumoured to be a Trojan horse for creating a greater Asia-Pacific economic union.

In Singapore, New Zealand has a partner with a patchy human rights record and lack of freedom of information through the news media and the internet. But other Asian countries are even worse. We may find our country entangled in a political structure that, unlike the European Union or the US, has no protections for civil and human rights.

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