06/04/2011 - 08:46

Analysis: good riddance ASX/SGX merger

06/04/2011 - 08:46

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"Doomed from the day it was conceived, and rightly so". They were the opening words used in this column five months ago about the proposed merger of the Australian and Singapore stock exchange - and they're worth repeating today.

"Doomed from the day it was conceived, and rightly so". They were the opening words used in this column five months ago about the proposed merger of the Australian and Singapore stock exchange - and they're worth repeating today.

It was back on October 27, when other observers were singing the praises of the proposed marriage of the ASX and SGX, that I took a different tack, questioning the merits of the deal and asking how long the farce would last.

We now know the answer to the time question, 162 days from birth to death at the hands of Federal Treasurer, Wayne Swan.

We may never know why the two stock exchange, in their wildest dreams, ever thought an Australian Government would accept Singaporean control of the Australian stock exchange.

But, in terms of botched deals the proposed ASX/SGX merger will go down as a text book example, failing every test including never surprise a politician, and being unable to say why it is in Australia's interest to have its institutions run from Asia.

All that the ASX/SGX cheer squad have been able to say is a variation on the "big is beautiful" approach to life, and that if the ASX did not get closer to Asia then Australian investors would miss out on big future deals, and the opportunity to participate in major capital raisings.

There might be some truth in that but the price asked, a transfer of effective control from Australian hands to Singaporean hands was far too high and failed to recognise Australia's unique place in the world.

As was said last October, Australia bridges the divide between the old world of Europe and the U.S. and the new world of Asia.

It is a fortunate position, and not one that requires us to make a decision about whether we are Asian, American or European. It's simply good enough to be Australian.

That is probably where the ASX ran off the rails. It was looking at its potential Singapore marriage partner as a simple business deal, as a way of making Australian companies more attractive to Asian investors, and easier for Australian investors to buy Asian stocks.

The problem with that line of thinking is that Australians do not want some of their most important decisions made in Singapore, any more than they want them made in Beijing, London, or New York.

Australia's interests run much deeper than the next business deal. There are long term considerations, and one of those is the value we have inherited as a country working comfortably in the old and new worlds, in much the same way Switzerland has been able to survive and prosper in the middle of tumultuous Europe.

Perhaps, and this is a horribly parochial suggestion, it is only from an outlier city like Perth that the future of a merged SGX/ASX could be clearly seen because over the past 40 years so many WA institutions have done east, showered in promises of local autonomy and how we'll be treated fairly and equally in the future.

Not one of those promises from Canberra, Sydney or Melbourne has ever been kept. It has always been a case of snatch and grab, returning only when the next commodities boom rolls around.

The great GST theft, which has seen WA short-changed of its fair share of tax revenue, is the latest example. The conversion of the Perth Stock Exchange into a dead-letter drop for ASX staff in Sydney another.

It's not often that Australia's Treasurer, Wayne Swan, has made a correct decision. After all he is the man who's fingerprints are on the failed first version of the mining super profits tax, and most of the other daft government decisions of the past few years, including failed stimulus spending on school halls and ceiling insulation, and the increasingly shaky National Broadband Network.

But, on the ASX/SGX merger proposal Swan got it right. Possibly for the wrong reasons, but right nevertheless.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

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