GO
Loading...

Australia Criticized Over Rejection of ASX-SGX Merger

This is a transcript of top stories presented by China's CCTV Business Channel as produced by CNBC Asia Pacific.

Hi, I'm Saijal Patel and you're watching "Asia Market Daily".

The Australian government is being criticized, over its decision to reject the Singapore Exchange's bid for the ASX.

Australian Treasurer Wayne Swan officially blocked the $8 billion merger on Friday, on national interest grounds.

But Professor Alex Frino disagrees with Canberra's decision.

He argues the rejection sends out a signal that Australia is unwilling to embrace global markets.

(SOT) Professor Alex Frino, Professor of Finance, University of Sydney and CEO of Capital Markets Cooperative Research Centre:
It's definitely a step back for Australia's market place, and the liquidity of the Australian market. This type of global combination would have helped us get greater exposure and greater reach internationally because the Singapore Exchange is very successful at doing that.

Analysts now warn the decision will hurt foreign investment in the nation.

Moody's Analytics - a unit of Moody's - went as far as to say it will do "considerable harm" to the country's reputation as a destination for foreign investment.

Professor Frino also holds a fairly grim view.

He warns ASX shareholders are unlikely to receive a better offer.

(SOT) Professor Alex Frino, Professor of Finance, University of Sydney and CEO of Capital Markets Cooperative Research Centre:
The only other suitor that has a balance sheet that's more powerful in the region is the Hong Kong stock exchange. And it's unclear though whether they can offer something as strong as SGX in terms of the second hurdle that needs to be cleared in this type of combination which is offer something that's in the greater national interest of Australia.

So what's next for the two exchanges?

Some tip the SGX could itself become a takeover target, now its plans of a union with the ASX have fallen through.

But Neil Katkov of research and consulting firm Celent doesn't think that's likely.

He says the two bourses should now focus on alternatives to mergers.

(SOT) Neil Katkov, SVP, Asia Research, Celent:
One thing is its valuation is extremely high, so that would dissuade suitors. But the other is, really if someone, some U.S. or European exchange did make a bid for SGX, it's quite likely the Singapore regulators would refuse that as well in the same way. But I think what the exchanges have to do is look for alternatives to out and out mergers for the time being, until the regulators sort of catch up with the world trend of allowing mergers with their exchanges.

Might be a good tip...

Well that wraps up today's "Asia Market Daily". I'm Saijal Patel from CNBC, thanks for watching.

All Rights Reserved. A Division of NBC Universal.