The Future of ASEAN’s Stock Exchanges

Big changes are afoot in the stock exchanges across Asia.

After the launch of the Shanghai-Hong Kong Stock Connect late last year, which allows foreign investors access to the Chinese stock market through the Hong Kong Stock Exchange, the Chinese government is now exploring the option of extending that service to Shenzhen as well, home to China’s second stock exchange.

In the ASEAN (Association of Southeast Asian Nations) market, the ASEAN Trading Link opened in 2012 with the stock exchanges of Singapore, Malaysia, and Thailand. The link up allowed investors easier and better access to the connected exchanges.

Today, no less than seven exchanges – from Vietnam (with two exchanges), Indonesia, and Philippines in addition to the aforementioned trio – are an official part of the ASEAN Exchanges, a collaboration to help improve investors’ access to the seven markets.

Business newswire The Edge Malaysia had even reported recently that Singapore, Thailand, and Malaysia are exploring the possibility of streamlining the initial public offering process in their respective markets. Instead of having three different sets of regulations for companies looking to go public, the three exchanges are looking to create a standardized listing requirement and process.

This would make it easier for companies to list themselves in more than one market, in turn helping to generate more listing and trading activity across the three exchanges in question.

The idea seems like a good one and could even be the first step toward even closer integration of the different exchanges across the ASEAN region. If successful, listed companies around Southeast Asia might even be seen as trading in one market, the ASEAN market place.

If the ASEAN stock market can be fully integrated in the future, it would consist of close to 4,000 companies. That sheer number can rival even  top Asian exchanges such as the Tokyo Stock Exchange and the Hong Kong-China Exchanges. For some perspective, there are less than 800 companies listed in the exchanges in Singapore run by Singapore Exchange Limited (SGX: S68).

As the world and the global economy becomes more and more integrated, there is a need for companies, including the Singapore Exchange, to think about how to scale their business globally. What is a better choice for the individual stock exchanges in Southeast Asia: Remain a closed exchange that only serves the local market or integrate with others and form a large regional exchange?

To me, the choice is an easy one to make and hence my simple question to them: “Why be contented with being a big fish in a small pond when they can be a gigantic whale in the ocean?”

But the road to integration won’t be easy. Given the many differences – politically, economically, and culturally – that exist between the many nations in Southeast Asia, there must be a strong willingness in each exchange to integrate with the others.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore writer Stanley Lim doesn’t own shares in any companies mentioned.