insto - Australian financial markets

In June 2010 Mallesons Stephen Jaques hosted a roundtable on opportunities for the Australian funds management industry in Asia. Here is an edited transcript of the discussion.

The Bond markets are off to a bumper start

Australia’s debt capital markets have continued the momentum of 2009 on into the early part of 2010, with several new themes.

While the expiry of the Federal Government’s Guarantee saw a flurry of last-minute activity, that story was overtaken by the strength of the Kangaroo market and a strong return by Australian corporates to the bond markets as they sought funding diversification.

The Australian Stock exchange’s monopoly on local equities trading will end in October when the Nomura Holdings-owned Chi-X opens for trade. Global high frequency traders are on their way, but is that a good thing?

Investors who jumped from skyscrapers in 1929 and those who sold out in panic after the 1987 crash should at least have provided historical lessons to those who watched in dismay as the Australian sharemarket plunged by more than 40 per cent in 2008.

It will never be known to what extent that historical experience was heeded, but it is a matter of record that the ASX All Ordinaries Index gained 33.4 per cent over 2009, after falling 43 per cent in 2008. The other main index, the S&P/ASX 200, put on 30.8 per cent after slumping 41.3 per cent the previous year.

As part of our 2009 review, Insto caught up with Rick Sawers, Group Executive, Wholesale banking, NAB.

How has investment banking in Australia changed during 2009

Some highlights from this week’s Thomson Reuters “Investment Banking Scorecard” include the following:

• Tech deals dominate record Taiwan M&A activity: Taiwan's Innolux Display Corp agreed to merge with Chi Mei Optoelectronics Corp, a manufacturer of LCD TV panels in a merger valued at US$13.1 billion, including debt. The deal ranks as the largest merger in Taiwan's history. M&A activity in Taiwan totals US$26.1 billion for year-to-date 2009, nearly five times last year's total and the largest annual period for M&A activity in Taiwan on record. High technology mergers account for just over 60 per cent of activity in Taiwan this year, while financials account for US$6.1 billion or 23 per cent.

While the corporate big guns have plenty of ammo in their kit bags, many of the mid-market listed companies are still doing it tough. Insto editor Bernard Kellerman spoke to the executives running a couple of mid-market businesses and heard two very different approaches to dealing with the GFC.

DIY project finance

When the banking syndicate decided to back away from his company’s transformational infrastructure project, Pipe Networks’ Bevan Slattery bounced back with an original response.

At its meeting today, the Reserve Bank of Australia’s board decided to leave the cash rate unchanged at 3.0 per cent. This almost universally expected result means the rate has remained unchanged for 5 consecutive months.

Global response, local reaction

In early July, Insto magazine and Mallesons hosted a roundtable on future financial markets regulation, with participation from a wide-cross section of the industry.

Standard & Poor’s Index Services Australia has removed Gloucester Coal Ltd  (ASX: GCL) from the S&P/ASX indices due to the unconditional acquisition of GCL by Osendo Pty Limited. This change was effective after the close of business on 19 June 2009.
Gloucester Coal Ltd will be replaced by SMS Management & Technology Limited (ASX: SMX) in the S&P/ASX 200 and by Apex Minerals NL (ASX: AXM) in the S&P/ASX All Australian 200. These changes will also be made effective after the close of business on 19 June.