Singapore exchange to buy 5 per cent in BSE for $42.7 billion

Mumbai: Singapore Stock Exchange (SGX) will buy a 5-per cent stake in Bombay Stock Exchange Ltd for $42.7 million, BSE said in a statement. This is the first overseas acquisition by Singapore Exchange, Asia's third-largest listed bourse.

The Bombay Stock Exchange had last month sold a 5-per cent stake to Germany's Deutsche Boerse for the same price, following a similar deal.

"This strategic tie-up with SGX will offer the Asian advantage to BSE," BSE chief executive and managing director Rajnikant Patel said in a statement.

SGX chief executive Hsieh Fu Hua said quoted as having said, "Together we aim to identify new business development opportunities."

The deal values the BSE stake far below the $2.3 billion paid to rival National Stock Exchange, after NYSE Group Inc and others, including Goldman Sachs, paid $460 million for stakes totaling 20 per cent in January.

The deal comes amidst warnings by some economists and strategists that Indian stocks are in danger of becoming a bubble. Stocks on the Indian exchanges are some of the most richly valued in Asia, after Bombay Stock Exchange's Sensex index jumped 45 per cent in 2006.

The Indian stocks are also highly volatile. Last week's Asian market correction took some of the froth off Indian stocks. A rebound in stock indexes on March 6 was followed by losses in Indian markets the next day. The Sensex closed 0.92 per cent lower at 12,579.75.

Despite the market volatility and fears of overheating, overseas investors are attracted by India's long-term economic prospects.