There seems to be a raft of merger and acquisition activity in the finance world right now, and that's good news for our sharemarket, suggesting healthy balance sheets, value on the market and great future prospects for our companies.
James Packer's raid on the Ten share registry, BHP's $40 billion tilt at Canada's Potash Corp, private equity firm KKR's so far unsuccessful move on Perpetual, and now the Singapore Exchange's $8.4 billion takeover for the Australian Stock Exchange are just some of the moves being made locally.
The latter is a significant deal, which if approved would create the world's fifth-largest exchange by value, and the second in the region, only behind Hong Kong.
Michael McCarthy, the Head of Dealing, Asia Pacific at Citi Index, says that analysts have largely praised the deal as a logical step in dealing with competition that each of the monopoly incumbents face in 2011.
For Singapore Exchange, it needed to look offshore to continue to grow, and a merger with the ASX would give it a chance to cut costs, increase product range and increase the size of its business.
It also allows the island nation to position itself as the regional financial centre, and for Australian investors it gives them greater access to a larger product range.
What that means for mum and dad investors, is that eventually, they'll be able to buy and sell Singapore listed stocks, or at the very least, have access to them via listed funds giving them more options for trade. But that may still be a while off yet with the fine print still to be agreed upon and of course products and services offered by online brokers.
Approval pending
In its public statement, the ASX said it needs to get approval from a number of bodies, including the Treasurer under Australia's foreign investment rules, ASIC and shareholders of both companies, although ASX management is confident it will go ahead. The move is expected to be completed by around July next year.
The deal also supported the Australian dollar today, which once again is edging towards parity. That's because for the deal to go through, Singapore would need to do the transaction in Australian dollars, so the company will be buying up our currency.
It wasn't the only thing supporting the Aussie, with the third quarter Producer Price Index up 1.3%, more than the 0.5% the market was expecting. This index measures how much businesses pay for the goods. It's the largest increase in almost two years.
Economists at NAB say the result is worrying suggesting it could flow through to a higher inflation read. We'll get the official Consumer Price Index on Wednesday. The market is already saying that a number above 0.8% for the quarter will mean a rate rise on Melbourne Cup Day. Higher inflation generally means higher interest rates.
And speaking of rates, no doubt shareholders and the media will be asking bank bosses what they're going to do about their own variable rates because they'll have greater access to the likes of Ralph Norris, Cameron Clyne and Gail Kelly.
The CBA will hold its annual general meeting on Tuesday, NAB profits will be out on Wednesday, ANZ unveils its earnings on Thursday and then it's Macquarie Group's on Friday.
It's going to be a big week.
