Season of consolidation continues

WINDS OF CHANGE BLOW ACROSS INDIAN STOCK EXCHANGES

The announcement by Deutsche Borse today to enter the booming Indian stock market comes at a time when a wave of consolidation among global bourses is sweeping across the globe.

Now, India's both premier exchanges BSE and NSE have foreign partners, even though the government has capped their holding in these institutions.

New York Stock Exchange (NYSE), which partners the NSE, has already started its moves in this regard and has signed a pact for cooperating with the Tokyo Stock Exchange and Shanghai Stock Exchange.

NYSE's alliance with Tokyo, is seen as first move towards possible strategic partnership, once the exchange goes public in 2009. NYSE looking forward to complete its acquisition of Paris-based exchange operator Euronext NV.

The exchanges are even taking to hostile takeovers to meet growth expectations.

The New York -based Nasdaq, the biggest competitor of NYSE, had put its hostile bid to take over the London Stock Exchange (LSE) twice this year. However, the shareholders of the British bourse spurned the $5.3 billion offer, while Nasdaq could garner small number of LSE scrip, despite coming out with attractive offer.

Prior to Nasdaq, the LSE had rejected similar offers from the Deutsche Boerse and the Australia's Macquarie Bank Ltd. However, after failure of LSE bid, the Nasdaq is also said to be interested in the Tokyo Stock Exchange. The exchange was also in talks with the BSE and could partner, if BSE decides to sell another five per cent in its equity.

The move, however, would go through, only if the new investor is seen as a non-competitor to the plans charted out by Deutsche Borse and BSE.

Analysts see the rising interests in the Asian bourses as a reflection of rapid economic growth, registered by the countries. Besides, the Asian stock markets are in need of more global recognition and participation, which leads to greater quality of investments coming to these bourses.

Besides technological advantages, the bourses could also explore developments such as cross-listings, which could see the companies as well as the investors benefiting from different time zones, to which the two partner bourses belong.

The consolidation wave is more into European countries, which have less regulatory issues for foreign investments compared with emerging markets.

Deutsche Borse has already signalled its readiness to play a big role in consolidations taking place in the European exchanges.