The Australian Securities Exchange (ASX) and Singapore Exchange's proposed $8.4 billion merger would benefit local investors by fuelling further development of the exchange-traded funds (ETF) sector, a new study has found.
The Australian ETF sector was "less developed" than other markets, an Access Economics report said.
The SGX offered 76 ETFs across asset classes including equities, fixed-income and money market securities. The ASX in contrast offered 33, only five of which related to asset classes other than equities.
"By utilising SGX's existing expertise in the ETF sector, ASX-SGX can establish a meaningful ETF sector on the ASX over a range of international and domestic asset classes including equities, commodities and market sectors," the report said.
Additionally, trading in ETFs represented just 0.5 per cent of the value of securities traded on the ASX in the year to September 2010.
This was low when compared to other large global markets such as the London Stock Exchange and New York Stock Exchange, where the figure was 8.2 per cent and 7.4 per cent respectively, the report said.
"ETFs are also likely to generate incremental liquidity on the ASX from additional investment funds flowing into new equity products, as well as market makers buying and selling portfolios of underlying assets to provide liquidity in ETF products," it said.
"The development of a larger local ETF sector will also provide domestic investors with simple access to new investment classes such as commodities and international shares."
The report also said a combined ASX-SGX intended to develop indices with constituents from both markets, with a top 50 ASX-SGX index and an ASX-SGX property index being examples.
"In combination with passport listings, the creation of new indices would improve the ability of domestic fund managers to raise funds across both markets to be benchmarked against these indices," it said.
"This would also provide increased choice of investments and diversification benefits for Australian fund managers."
The Access Economics report, commissioned by the ASX, is designed to outline why the ASX-SGX merger would be in the national interest.
