I also extend a warm welcome to our shareholders in Sydney, watching this live from the auditorium in Exchange Centre, as well as to ASX staff around the country. I remind you that we will be recording today's meeting and copies of the presentations as well as a webcast will be available later today on the ASX Shareholder Information section of our website www.asx.com.au.
I might add at this point that as evidence of our commitment to maintaining our acknowledged position among the vanguard of financial institutions in this area, we have recently upgraded the efficiency and capacity of our website, to deliver timely and significant information to the market, our customers and ASX shareholders. I hope that you as shareholders find it a useful source of information about your company's activities.
Before turning to the formal items of business, I would like to briefly discuss the rapidly changing environment in which we operate, and to outline our strategic responses to these changes. I will then ask the Managing Director to provide an overview of your company's performance over the year and to comment in more detail on some of our recent initiatives.
The last financial year was a challenging year, in which ASX has made great progress towards achieving the goals we set ourselves three years ago when we took the historic step of demutualising and listing on our own exchange. The company you now see before you is vastly different, and incontestably the better for it, than that which listed on 14 October 1998, owned by 606 members of the stockbroking community.
The public company, ASX Ltd, is now owned by some 16,500 shareholders, drawn from all sections of the community across Australia and with a growing international presence; a company whose original shareholders are now outweighed by Australian individuals and small superannuation funds; a company that I believe is ideally placed to build on past performance and to capitalise on the opportunities it has itself created.
Most of you would be aware of the financial results of the past year, a detailed review of which can be found in the Annual Report to Shareholders. Since this is the first AGM we have held in Melbourne since listing, I will take the opportunity to single out the highlights of the most recent year against a backdrop of our financial performance since 1997-98.
In general, 2000/01 was a good year, with strong performances reflected across all our core markets. This was a particularly creditable effort given the necessary investment in long-term initiatives - initiatives that we believe leave our company well placed to deliver on its clearly defined and stated strategy.
While the overall level of market activity remained high, the year was one of consolidation after the extraordinary levels of activity in the equities market in particular of the previous year. Equities volumes were down on those record levels, as were the number of new listings. However it is important to note that in both cases strong performances were still recorded.
At the time, of our demutualisation, the prospect of enjoying an established annual average of more than 50,000 trades per day would have seen us approaching what the financial media like to describe as "nosebleed territory." But it is now seen as "normal" - testament as to how far we have come in such a short while.
Complementing rather than offsetting our equities and listings performance, derivatives volumes reached record levels, and market data also continued its strong growth of recent years. And I would point out that less than one percent of ASX's revenue is derived directly from retail investors seeking market information, with almost all market data revenue coming from local and overseas businesses rather than individuals.
This morning we released to the market our unaudited results for the first quarter of the new financial year. Copies are available at the registration desk. On an unaudited basis, revenue was $50.7 million - up $2.8 million on the corresponding period last year - while our profit fell slightly to $13.2 million. Average daily equities trades remain just short of 55,000, and the performance of the options and warrant markets remain at record levels.
Our increased costs reflect our intensive phase of development and implementation of a number of strategic initiatives. As we have said on previous occasions, such investments will ensure your company remains well-placed to implement its longer term strategy and over time to deliver greater shareholder value. Richard Humphry will discuss these activities further, shortly.
While promising in themselves, what is most significant about these results is that they bear out ASX's long term strategic imperatives. The strategy is no secret, and it has not changed. The economic changes and market movements of the past two years do nothing but add weight to the strategic decisions we have made.
The four strategic imperatives of the ASX vision are:
- enhancing core business, capacity, access and liquidity;
- broadening the markets we operate or support;
- increasing the marketplace services we provide; and
- increasing our international reach.
However, while much media and analyst attention is, not surprisingly, paid to the new possibilities being developed or explored by ASX, we are also focused on our core businesses.
Increasing the depth and liquidity of our capital markets, and increasing the access to them both within Australia and from overseas, is a core competency of ASX. Demonstrably so. Our market is twice as big as it was just five years ago, and there are a number of reasons why that growth should continue over time. And for Australia's sake, as well as your company's, it must.
Increasing the services we provide, be they through co-operation with existing operations such as Perpetual or BridgeDFS - now being renamed IRESS Market Technologies - or through conceiving and developing our own concepts, as with the processing of transaction services for the managed funds industry, is also a key component of this strategy, complementing the protection and enhancement of existing businesses with diversified revenue stream and growth potential.
There is one other strategic imperative I have not discussed, but without which anything the ASX does would be seriously devalued. Protecting the integrity of our brand and our markets is critical to ASX's continued success. It is not an optional extra, and nor is it an enemy of our customers or of our shareholders; rather, it is central to our commercial success. Richard Humphry will expand on this theme.
One significant recognition of Australian capital markets'development was the recent decision by the global index organization Morgan Stanley Capital International to overhaul its equity indices to better reflect the world equity markets' shifting realities. Without going into too much detail on the changes, which will occur in two phases from next month, ASX was a clear and deserving beneficiary.
These indices are the benchmarks used by global fund managers in constructing their portfolios, and what the overhaul has done is put Australian companies - companies listed on ASX - firmly on their shopping list. For example, Australia's weighting in the MSCI Asia Pacific (ex Japan) index increased from 25.7% to 35.1%. That is almost double the weighting of the second largest economy, Hong Kong 18 p%, and well ahead of Taiwan 12% and Korea 13%.
What does this mean? Besides the obvious and welcome increase in funds for ASX's markets - estimated by analysts to deliver $1.2-1.5 billion in net fund inflows - it sends an all important message around the world on the vitality and viability of Australia's capital markets. The MSCI restructure ranks ASX 10th in the world, greater than our market capitalisation would place us, which is a strong endorsement of our liquidity and our efficiency.
And it is just as well. To put it bluntly, Australia's market capitalisalion, in global terms, is tiny. No more than 1.3%, which leaves us about a tenth the size of Tokyo and twice as small again compared to the two North American giants, New York and Nasdaq. You would therefore think that in the economic circumstances of today, our markets must be in dire straits.
If the USA gets a sniffle, the story goes, then Australia must therefore suffer the cold. Not necessarily so.
We predict market valuations and activity with one hand behind the back, fingers firmly crossed, but it is possible to see some portents in the recent history of Australian and global market trends. And they are positive portents.
Two years ago, when the world seemed enamoured of any company with a communication or technology application, whether real or imagined, the Dow Jones Industrial Average was soaring towards 12,000 points. It had surged impressively through the previous year and the increasingly vociferous criticism of Australian markets was that they did not share the bold and uncritical vision of this brave, wireless world. Well that criticism was right - by and large, our market did treat the dot.com and tech-boom with greater caution, and in hindsight that seems a very good thing, too.
Just as Australia did not reach the heady heights of those irrationally exuberant days, so I believe will we not plumb the same depths as the North American and other markets. The Australian market has actually performed very well indeed. In terms of market values, it has outperformed all comparable markets worldwide this year, including the major players of North America and Europe. The Australian market, as we have seen ever since the slowdown in the technology sector in April 2000, has performed remarkably well by world standards - and continues to do so.
The outrage of 11 September has added a new dimension of uncertainty to the world's economy. Stock markets are constantly changing barometers of a nation's and the world's health, and uncertainty usually means volatility and reasonable market activity. Time will tell whether the terrorist attacks will drive the US economy into a deeper and longer recession than might otherwise have been the case, or whether the fiscal and monetary response of the US authorities will mean a faster recovery than had the attacks not occurred.
ASX is taking nothing for granted. We are well aware of the fragile nature of current affairs and our strategy is designed to position us to accommodate whatever outcomes international and domestic issues send our way.
Maintaining the good health and ongoing viability of Australia's capital markets require constant attention. Just as Australia is increasingly entwined in world events, if not invariably subject to reflecting them, so is ASX itself an active participant in national affairs - particularly as they affect the condition and future of Australian markets and the companies who operate in them.
One such issue has been that of ensuring it remains attractive for our top companies to remain in Australia, where their presence not only adds to the depth and liquidity of ASX's markets, but also provides an inestimable benefit to the national economy. This is necessarily a tripartite approach, involving not only ASX, but also government and the financial community.
For our part, maximising the markets' efficiency and ensuring the highest standards of integrity are central to this task. So is actively lobbying for and supporting government improvements of taxation laws and other regulations that might otherwise prove a disincentive to business in Australia.
Since our last Annual General Meeting, some crucial developments have occurred which should have significant and positive impact in this area. The passing of wide-ranging reforms to the Corporations Act, due to come into effect in March, the extension of capital gains tax rollover relief, the removal of stamp duty on marketable securities, the introduction of legislation enabling the easier purchasing of government bonds by retail investors and, only this month, the signing of the treaty with the United States to remove the dividend withholding tax for Australian companies with large offshore revenue.
These are all welcome reforms, and initiatives strongly and actively pursued and supported by ASX. The cause of reform does not stop, and there is more to be done. But these reforms will all prove worthwhile, for both ASX and for Australia. I should also note that these reforms have attracted largely bipartisan support - a notable feature of financial services regulation in this country that reflects considerable credit on all sides of the political contest.
In reviewing the strong performance of the company's core operations as well as the progress being made on new initiatives that will provide for its longer-term growth, one final factor has to be acknowledged; our employees, without whose dedication and vigour there would be no success. And appreciation is also extended to our shareholders. As always, we appreciate your continued support of the company and look forward to another excellent performance in 2001/02.
I would like to assure investors that ASX remains committed to its strategy. We remain confident that a strong company can be made even stronger by seizing the opportunities as they present themselves and capitalising on those we create ourselves.
As we note in the Annual Report to Shareholders, while ASX has a strong track record of anticipating changing market conditions and has developed a sound platform for growth, now is not the time for any exchange to be reflecting on past achievements at the expense of working to secure its future.
I am not given to quoting at length, or always admiringly, of everything written by our market analysts, but a few weeks ago I noticed one particularly perceptive comment from an equity strategist - an observation I think we should all bear in mind as we confront the challenges and opportunities before us: "Now, more than ever, it is important to focus on the medium term and not be distracted by the noise, volatility and emotion of the short term".
