In 1987, the Australian Stock Exchange (ASX) was formed amalgamating six independent state-based stock exchanges. Their histories stretch back as far as 1861 when the first stock exchange was formed in Melbourne.
In 1998, the ASX demutualised, with shares sold to the public, and the ASX Limited (ASX: ASX) became the first stock exchange to list on its own market.
Now, further global consolidation could see the ASX rendered to a backwater exchange or totally disappear unless it is allowed to expand internationally or be taken over by another exchange.
Several trends such as the rise of US companies like Google, Apple, Microsoft, McDonalds, Visa and Mastercard becoming true global companies and the proliferation of global services such as subscription video on demand (SVOD) giant Netflix as well as YouTube, Paypal, Uber and AirBnb all disrupting local players could see many of our local companies disappear.
Many Australian companies have relied on their local advantages for years, such as our three commercial TV networks, but that may be coming to an end.
The recent takeover of Toll Holdings Ltd by Japan Post, Brookfield Infrastructure's $8.9 billion bid for Asciano Ltd (ASX: AIO), Woolworths SA's takeover of department store retailer David Jones and the consistent takeovers and disappearance of our listed agricultural companies also perfectly illustrates the globalisation of a number of industries.
Today's bid by Woodside Petroleum Ltd (ASX: WPL) for fellow oil & gas producer Oil Search Limited (ASX: OSH) also shows that scale, size, and geographic diversity are becoming increasingly important factors for many companies.
The ASX is already top heavily, with our four major banks, two retailers and two giant resources companies representing 40% of the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) and roughly a greater value than the 2,000 smallest companies listed on the ASX.
Continued takeovers of larger Australian companies could see the ASX lose its relevance on the global stage. We could also see a number of large Australian companies that are true global businesses decide to delist from the ASX and move their listings to the US or Asian exchanges. Westfield Corp Ltd (ASX: WFD), Brambles Limited (ASX: BXB) and News Corp (ASX: NWS) are just three that spring to mind.
Foolish takeaway
In several years' time, Australian investors may face the prospect of either selecting a few global players still listed on the ASX, the big four banks or taking a punt on the speculative end of the ASX stock market with very little in-between. Maybe the ASX has already lost its relevance?
