Monday, December 10, 2007

Different trades

The stock exchanges of Malaysia and Singapore, which used to be one entity, have performed quite well since they split and went public at the turn of 2000.

They are the only two stock exchanges in Asean that have become listed companies although they remain as market regulators. Bursa Malaysia, formerly known as the Kuala Lumpur Stock Exchange, went public in 2004. The Singapore Exchange or SGX was floated in 2000.

But the two exchanges have not been able to join forces to become a more formidable player despite their close historical links and the natural combined liquidity of the two markets. Their plan to set up a cross-trading platform has effectively been aborted although both sides have not said so.

Their action shows they are more willing to tie up with other partners instead.

For instance, Bursa Malaysia today confirmed a news report that it’s in talk with the United States’s Chicago Mercantile Exchange (CME) on a possible tie-up that may involve equity holding. The Star had earlier reported that CME may buy a 10% stake in Bursa Malaysia at about RM20 per share. This is a huge premium to Bursa Malaysia’s last traded price of about RM15 and values the entire Malaysian exchange at more than RM10 billion.

Earlier, CME had a equal partnership with SGX to list commodity futures products, such as crude palm oil and rubber, on a Singapore-based exchange called Jade. However, in November this year, the CME group abandoned Jade, selling its stake in the venture to SGX. No real reason was given but one cannot discount the possibility that the failure was due to their ability to secure crude palm oil prices from Bursa Malaysia.

SGX has also moved on following the difficulty in setting up a cross-trading platform with Bursa Malaysia since 2005. SGX bought a 5% stake in the Bombay Stock Exchange in March for US$47.5 million, while the Tokyo Stock Exchange bought a 4.99% stake in the SGX in June for US$321 million.

The simple question remains: Why can't the listed stock exchanges of Singapore and Malaysia strike a commercial deal despite their two countries' long list of outstanding bilateral problems?

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