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Globalization forces bourse consolidation

DPA, FRANKFURT
Tuesday, Jun 06, 2006, Page 9

Globalization is rapidly reshaping world stock markets with the New York-Euronext merger raising questions about the future of European bourses sidelined by the new trans-Atlantic mega-market.

The New York Stock Exchange and Euronext moved on Thursday to end the long-running battle for control of the Paris-based bourse by agreeing to a forge a new share market that would bring together companies with a total market value of about US$27 trillion.

But the landmark deal with Euronext, which operates stock markets in Paris, Brussels, Lisbon and Amsterdam, is likely to keep up the pressure for consolidation among Europe's stock markets especially as a way of trimming costs and broadening the platform for share sales.

In particular, the US$10 billion merger agreement will put the spotlight on the Frankfurt stock exchange operator, Deutsche Boerse AG, which had been locked in a battle with the New York exchange for taking over Euronext.

Deutsche Boerse declined on Friday to comment on the merger.

But the New York-Euronext merger is also likely to spark speculation about how the bourses such as Rome and London face up to the new fast-paced globalized stock market competition.

Apart from being Europe's biggest equities market, London has also been the subject of takeover maneuverings in recent years including from New York's NASDAQ Stock Market, which already has built up a 25 percent stake in the London Stock Exchange.

Milan stock exchange chief Massimo Capuano was to meet his Euronext counterpart Jean-Francois Theodore later on Friday for talks.

In the meantime, investors appeared to give the thumbs up to the Thursday's merger announcement with Euronext shares rising by 2.5 percent in trading on Friday and shares in the New York Stock Exchange group jumping by more than four percent. Deutsche Boerse's stock, however, fell by more than 1 percent.

However, in the wake of the New York-Euronext deal, the German government threw its weight behind greater integration of Europe's stock markets.

While stressing it was up to the respective groups' shareholders to finally decide on the merger, the German government's deputy speaker Thomas Steg told reporters on Friday that the Deutsche Boerse had made "an extraordinarily attractive offer."

He went on to say that Berlin "backed European stock market alliances," adding that only then would the bourses have a chance "to establish competitive structures." But with Deutsche Boerse having rejected raising its bid as New York and Euronext edged closer to a deal in recent weeks, analysts are not expecting the Frankfurt group to top up the offer for its Paris-based rival, which is Europe's second biggest stock market.

More to the point, the so-called merger between the NYSE Euronext and Boerse, along with the other possible new partnerships, could leave the Deutsche Boerse isolated and at the same time cast fresh doubts on Frankfurt's role as a world financial center.

Despite Germany being Europe's biggest economy and Frankfurt being home to the European Central Bank, many financial houses have been seeking to focus their operations on what are considered to be the more free-wheeling Anglo-Saxon financial markets, such as in London.

The Deutsche Boerse only hope now to emerge as the victor in the struggle for Euronext would be if the Paris-based group's shareholders voted down the New York Stock Exchange merger bid.

This is not entirely out of the question as a large group of Euronext stockholders support teaming up with the Deutsche Boerse.
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