When we engaged the chief executive of Singapore Exchange, Magnus Böcker, in a debate over his bid for the ASX, a whole new set of facts and forecasts emerged.

I put it to Böcker that the Singapore-ASX merger was really an attempt to merge two financial centres that had been losers. Australia has aspirations to be a regional centre and has not succeeded. Singapore had similar aspirations which were not realised in the way that had been envisaged. Both sets of aspirations have been overtaken by the rise of Hong Kong, Shanghai and China.

I don’t think the Singapore CEO had been exposed to that view before and yet it goes to the heart of whether a Singapore-ASX merger is a good move for both Australia and Singapore — but particularly for Australia. Böcker is a Swede and an experienced stock exchange executive who has been in Singapore for about a year and in response he explained what he believed would happen in Asia in a way we have never heard before.

Böcker believes we will have seven financial centres in the Asia Pacific region — Mumbai, Shanghai, Seoul, Tokyo, Hong Kong, Singapore and Sydney.

“Mumbai, Shanghai, Seoul, Tokyo, to some extent Sydney so far, have been successful, but very domestic. All of what they’ve built is built for their own country. Shanghai is a very successful financial centre, but it’s a Chinese-focused market. Tokyo has been a financial centre for 25 years or 50 years, but is very Japanese; very little international business is in that one,” he told the KGB.

“So the only two markets I think that are reasonably international are Hong Kong and Singapore. Hong Kong is becoming more and more Chinese, and I think they will be a very successful financial centre in the years to come, but they will be a proxy for China. No one goes to Hong Kong in order to reach India.

“Singapore is more the proxy if you call it Asia-lite, or whatever you call it, but it’s a question of being a good proxy for India. You find a lot of Indonesian guys sitting in Singapore trading Japanese products.

“I think the economy of Australia is unrivalled nearly over the last 20 years and therefore Sydney is a fantastically successful financial centre for Australia…Will Australia continue to succeed? Will investors, as well as companies, be overexposed?”

Böcker’s argument is that Australia just can’t sit back and do nothing because cycles will turn and we must broaden our base and offer Australian institutions and self-managed funds more international product. I agree with that and what the ASX should have done is appoint someone like Böcker to look for the best merger partner if that was required

Is Singapore the right partner? When Stephen Bartholomeusz asked Böcker that question directly his answer was not impressive.

In part, he said that you choose the partner that will give you a good working relationship and where you develop together. “In this case it’s so important to bring the combination of insights, of products, of distribution, of the competence, and I think that fits together.” While Böcker is right about compatibility you also need the best strategic partner.

Böcker confirmed Business Spectator reports that in equity trades Singapore charges were four times Australia, but this was because Singapore did not have the volume of liquidity and it was taking steps to remedy this. There’re no way the high Singapore charges would come to Australia. Singapore was an Asian leader in derivatives but Australia had one of the best interest rate futures systems in the region and Singapore could help broaden it.

So while Böcker and many others would disagree, this is a merger of financial centres that did not succeed in their aspirations and hope that together they can realise them. I think it is a good description of what is taking place. I think the odds are that Singapore may get a lot more out of this than Australia but again others will disagree.

Just because Böcker and the Singaporeans are nice people (and they are) is not a good reason to merge. Would we be better to go with Mumbai or Hong Kong? Or should we be taking America into Asia by merging with, say NASDAQ. These are debates we have never had. What has been put before us is a merger with a stock exchange that has a lot of work to do in equities to get to the Australian level.

It’s not until you realise that this is a merger of exchanges which have not achieved their regional aspirations that you can start to look at the alternatives.

*This article originally appeared on Business Spectator

Peter Fray

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