Poor Americans may have trouble paying off their subprime mortgages, leading to difficulty for mere mortals to get loans from banks. But the big money is proving that the era of excess cash sloshing around global markets is far from over. Temasek's purported bid for Nasdaq's 30% stake in the London Stock Exchange shows there is still lots of money chasing ideas. The recent volatility in the market hasn't dampened the appetite for these big deals at all. It has simply provided a window of opportunity for predators to make their move. For the Singapore Exchange Ltd, this means a takeover bid may come sooner rather than later. The next question is, whether this would be good for Singapore.

Here's why: If a 30% stake in the London Stock Exchange, whose total equity per share is negative £1.61 according to Reuters data, can be sold for £800 mln, then surely the Singapore Exchange must be an attractive target. Even if last Friday's closing price of S$9.45 means it is priced at more than 12x book value (!).
The SGX has a lot going for it.

· The best reputation for corporate governance of any exchange in Southeast Asia.
· The highest total market capitalisation of any exchange in Southeast Asia of US$505 bln. The next biggest exchange is Bursa Malaysia, whose listed companies are worth a total of US$306 mln (end June figures).

There are a number of additional but familiar points to note, such as Singapore's status as a financial centre, and so on. Critically, it's a well-run business with strong cashflows and a healthy cash balance.

Already waiting to raise its stake is the Tokyo Stock Exchange. Mid June it bought a stake of just under 5% for $304 mln. If their application to raise their stake beyond 5% goes through, who knows where it will end.

"Global competition between exchanges is intensifying," TSE President Taizo Nishimuro told a news conference, quoted by Reuters, "Singapore is very important as an Asian financial centre, and if we didn't buy these shares we are sure someone else would look to buy in."

That is almost certainly true, but talk to market watchers in Singapore and they're less than enthused about the TSE being the potential suitor. Despite its huge size and global economic significance, the Tokyo Stock Exchange isn't exactly a dynamic organisation that keeps up with the times. They didn't even hire a Chief Technology Officer until the market crashed under incredible volumes in November 2005.

Insiders I've spoken to in Singapore say the conservative nature of the Japanese in general and the TSE in particular would be disasterous for an exchange like the SGX. In many ways it is at the other end of the spectrum to the TSE. Unlike the TSE, the SGX is a small market fighting for relevance. Unlike the TSE, it needs to think entrepreneurially to survive. Unlike the TSE, it needs to attract companies from around the region. And unlike the TSE, the SGX not only has a system which doesn't crash under heavy volumes (although the data feed may slow), but it has also had a Chief Technology Officer for a lot longer to look after it.

If the Singapore Exchange really has to be taken over by someone – and I think it is inevitable that it will, given the fact that Temasek is not on the shareholder registry and Singapore generally is very open to foreign investment – then I sincerely hope it is Hong Kong Exchanges and Clearing.

This might seem outrageous, given the intense competition between the two. But that's just the point. Arguably, more could be achieved between two exchanges if they actually worked together. They are already similar in their circumstances, their corporate governance standards and their goals. Such a tie-up would make much more sense that a bid from the TSE.