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Sep 03, 2012

South East Asian exchanges prepare to connect

Singapore and Malaysia will be first to link up under new trading system that aims to rival markets in Hong Kong, mainland China and India

The launch of a trading system that will connect the markets of South East Asia has moved a step closer after Singapore Exchange (SGX) confirmed it will link up with Bursa Malaysia this month.

The ASEAN Trading Link is a grand project to connect seven capital markets in the region, allowing investors to trade easily across borders and potentially building a huge pool of liquidity.

SGX announced yesterday the Singapore bourse and Bursa Malaysia will be connected through the new system from September 18, with the Stock Exchange of Thailand expected as the next market to join up.

The plan is for four other markets to participate at a later date: Vietnam’s Hanoi and Ho Chi Minh City stock exchanges, the Philippine Stock Exchange and Indonesia Stock Exchange.

Under the ASEAN Trading Link, an investor in one market will be able to directly access the market in another, rather than going via a local broker that must deal with a broker in the other country.

At a meeting in April of ASEAN Exchanges, the body that represents the seven markets, SGX’s CEO Magnus Bocker outlined what he sees as the benefits of the project.

‘The collaborative decision of the member exchanges to roll out the ASEAN Trading Link will mark our first key milestone toward breaking down the barriers to cross-border trade in [South East Asia],’ said Bocker.

‘Through the trading link, investors in ASEAN [companies] will enjoy a new ease of access to a wider investment selection and be able to tap the region’s growth opportunities.’

The three bourses that will initially participate in the ASEAN Trading Link collectively account for two thirds of the $2.1 tn market cap of the seven ASEAN exchanges, added Bocker.

The South East Asian exchanges hope the project will encourage further inflows of funds to their bourses, helping them to rival the fast-growing markets of Hong Kong, mainland China and India.

The seven exchanges together would create a market with more than 3,600 listed companies and serve a population in excess of 600 mn people, according to ASEAN Exchanges.