Asia, Oceania bourses seek greater cooperation

MANILA, Philippines - The Asian and Oceanian Stock Exchanges Federation (AOSEF) is seeking greater cooperation among its members to ride out the economic turmoil that has gripped the world.

In a general assembly held last April 23 at the Mactan Shangri-la Hotel in Cebu, the 19-member AOSEF underscored the need to band together to maintain competitiveness.

The market capitalization of the Asian and Oceanian region, a key indicator of the value of stock markets, has increased from 15 percent of the total global markets at the end of 2000 to 27 percent as of January 2009.

Pooling together the five major bourses in ASEAN—Singapore, Malaysia, Indonesia, Thailand and the Philippines — would result in a larger capital base worth $643 billion.

Among the bourses with highest market capitalization include the US, Europe as well as other Asian exchanges like Tokyo and Hong Kong.

Exchanges in the region are faced with twin global threats of mergers among bigger exchanges and emerging technology that enables the creation of alternative trading systems that bypass traditional exchanges.

A study conducted by the Stock Exchange of Thailand noted that each ASEAN bourse currently has a market capitalization of between $51.38 billion and $232 billion. Of that range, the Philippine Stock Exchange (PSE) ranked 39th among WFE exchanges with a market capital of $51.4 billion.

“Although other member exchanges identified certain challenges to setting up an ASEAN linkage such as issues on securing support from regulators as well as establishing liabilities for clearing and settlement, it is evident that many of them were interested in the plan to create a stronger and more visible ASEAN asset instrument at a time when global exchanges are consolidating,” said PSE president Francis Lim.

The Korea Exchange, for its part, sug gested the creation of a centralized clearing of credit derivatives among AOSEF members as most Asian exchanges were moving independently on the clearing and regulation of over-the-counter (OTC) products.

“AOSEF members noted that the global financial crisis was due to the failure to manage the risks attached to credit derivatives. The growing concern among them today is how to best manage the risk arising from OTC derivatives trading. They have also noted that global exchanges are now racing towards a joint clearing of OTC products and that there is slower progress among Asian markets. But the challenge remains for most Asian exchanges to develop more sophisticated products to offer alternatives to investors even when market conditions are weak,” Lim said.