ASX-SGX – incompatible mates?

It’s not a surprise, but it’s still a horribly indigestible piece of news. SGX-ASX deal is not only not in Australia’s national interest, it’s contrary to its national interests. It’s the starkest revelation from Australia’s Federal Treasurer Wayne Swan that the SGX-ASX proposed merger (or takeover, according to opponents of the deal) is somehow an unsafe and unwise move for the future of Australia.

While Swan’s final decision, which will come within the next few days, is not going to surprise anyone, we will just have to wait to see if he will deliver on his promise to “publish all of [his] reasons in full and part of that will be the advice from the Foreign Investment Review (FIRB)”. Swan has strongly denied there was any political interference behind his decision, noting he based his initial decision on an unanimous advice and recommendation by the FIRB that the takeover would not be in the national interest [read more here].

But the reality will be that the final rejection (when it comes) will be based in part on political objections (some of which are raised here). Even if “full” reasons are given by Swan, we can be quite certain that political grounds will not be spelt out in its entirety aka wikileaks uncensored revelations.

As stock exchanges are often considered as national hallmarks which do more than enshrine the principles of free and efficient market economy, it is expected that any merger and acquisition would be subject to the closest and harshest scrutiny by top political and financial leaders to ensure national interests are served. The invocation of “national interest” does not always result in consensus, as it can run the whole gamut of goals, issues, objectives, risks and stakes that the country perceive as beneficial, fundamental, major or vital to its survival or growth. What is evident in the ASX-SGX case is this – if the deal does not pass muster politically, no amount of commercial merits would satifsy “national interests” test.

At this moment, the deal is not officially terminated. Perhaps, by announcing his “disposed to” verdict, Swan is hoping for SGX to get the message and voluntarily call off the deal. In a test of true grit, SGX has taken the stance – it’s not over til its over.

Read more:
Swan’s ASX black box. [Crikey]
What next for Singapore and the ASX? [FT]
ANZ chief questions Swan’s ASX move.[smh]
ASX-SGX – Why the combination is in Australia’s national interest. [Available in pdf here]