Foreign cash blow

Published in the Herald Sun, April 2011 by Peter Taylor and Karina Barrymore

Treasurer Wayne Swan has cast a pall of "sovereign uncertainty" over Australia's mergers and acquisitions market by scuttling the ASX takeover, a leading economist says.

And the move to reject Singapore Exchange's $8.4 billion bid for its Australian counterpart will damage the nation's reputation as an investment destination, according to Moody's Analytics senior economist Matt Robinson.

In a scathing note on Mr Swan's decision yesterday, Mr Robinson said it would "discourage foreign investors from considering future opportunities in Australia".

"The Australian equity market operator risks being marginalised and ultimately dying a slow death now it has been forced to spurn its more efficient suitor," he said.

His comments came as the ASX and Singapore Exchange terminated their agreement in the wake of the Treasurer's decision.

Mr Swan said it was a furphy that the tie-up would have provided a gateway to Asian capital flows.

"The deal would not provide Australia greater access to global capital markets," he said, adding that it would have risked the loss of domestic jobs and capital.

He signalled that reforms to strengthen regulation in Australia's exchange marketplace were necessary before the ASX entered into another deal.

Platypus Asset Management chief investment officer Donald Williams criticised the rationale. "The Government doesn't seem to understand the difference between ownership and regulation," Mr Williams said.

"The issue now is that ASX could end up being a wallflower while other exchanges globally get together and develop superior platforms."

Credit Suisse analyst John Heagerty said the ASX group would be left "with a much weaker negotiating position" in merger talks as a consequence of the Government's intervention

But Dale Gillham, founder of boutique fund manager Wealth Within, welcomed Mr Swan's move, saying: "It really wasn't beneficial for Australia at all."

ASX shares yesterday fell a further 15c to $33.33 their lowest level in more than six months.