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Goldman Sachs, Apple Might Top This Wish List: William Pesek
Oct. 29 (Bloomberg) -- Leave it to tiny Singapore to tell us where the global economy is heading.
We used to look to the gargantuan U.S. economy for guidance on financial trends. After Wall Street's collapse, we turned to the Group of 20 nations. More insight might be gleaned looking at an island nation with 5 million people.
The idea that a place with no natural resources and a state-capitalism model is a global bellwether will strike many as absurd. Yet Singapore Exchange Ltd.'s attempted takeover of Australia's stock exchange shows how Asia's money is changing the face of finance and geopolitics as we know it.
Singapore Exchange's A$8.1 billion ($7.9 billion) bid for ASX Ltd. might not go through amid an outcry from Australian lawmakers. It almost doesn't matter. The point is that fast- growing and cash-rich Asia is about to go shopping in ways that might shock the biggest developed economies.
This transaction is full of chutzpah. Singapore's stock market is half the size of Australia's and the deal looks expensive. The real issue is ambition. Singapore is clearly prepared to spend big to get economies of scale that don't come naturally. Expect more of this dynamic in Asia -- even from smaller countries that get little attention globally.
How will the West respond when China, Japan and India go on a mergers-and-acquisitions tear? And those are just Asia's three biggest economies. Executives from Seattle to London should also expect more phone calls from acquisitive companies in South Korea, Indonesia, Taiwan, Hong Kong and sovereign wealth fund managers everywhere.
Next Wave
China has been scooping up energy assets around the globe, and has $2.6 trillion of reserves to accelerate the campaign. It seeks to leapfrog over the years needed to build domestic corporate powerhouses. In today's world, it's easier to buy a chunk of International Business Machines Corp. than create and cultivate brands over time. As the yuan rises, tech leaders like Nokia Oyj or Motorola Inc. become cheaper for mainland executives. Why censor Google Inc. when you can just own it?
The next wave of globalization features developing nations buying the crown jewels of developed ones, and it will be messy. In 2005, the U.S. Congress freaked out when China's CNOOC Ltd. bid for oil company Unocal Corp. and scuttled the deal. Just wait until China sets its sights on Boeing Co., Microsoft Corp. or Goldman Sachs Group Inc.
Goldman Envy
This last name has long been coveted in Asia. Government officials in Tokyo and Seoul crave having globally known, savvy and profitable financial leaders. That tends to be code for having their own Goldman. Now, Asia could just buy the real thing. Well, try to at least.
It's hard to believe developed-market lawmakers would let many household names fall easily into Asian hands. Creative attempts would be made to explain why Pacific Investment Management Co. being acquired by foreigners poses a national- security threat. Or why Apple Inc. or cable news network CNN must remain American concerns.
Never mind how these arguments might run afoul of World Trade Organization rules. The next few years will see a disorienting flurry of takeover bids from Brasilia to Beijing, putting politicians in unprecedented positions. Nationalistic tendencies will collide with globalization as never before.
Singapore helped prove the point that Asia has money at a time when others don't. Its investment firms in recent years took stakes in Citigroup Inc., UBS AG, Barclays Plc and others, shoring up some of capitalism's biggest names. Bidding for Australia's ASX is the next logical step and a reminder that Singapore's long game is worth watching.
Bet on Gambling
Take casinos, which are suddenly the rage in conservative Singapore. The government realized it had to let its hair down to net more of the tourism dollars flowing elsewhere in Asia. Welcoming casino-resorts run by Genting Singapore Plc and Las Vegas Sands Corp. was a gamble that is clearly working. So was revamping downtown to host Formula One races. Tourist arrivals are exploding, and other Asian capitals are racing to emulate Singapore's success.
Singapore is working to reinvent itself as a biotechnology hub with reasonably liberal immigration laws to feed its development. Its transparent financial system has been a magnet for hedge funds setting up shop in Asia. The ASX bid is recognition that Singapore can't grow much beyond its domestic market and must look outward.
Opportunities Abound
Asia wants to avoid Japan's arrogant and ill-considered purchases during the bubble years. Buying Rockefeller Center and the Pebble Beach golf course didn't work out so well for investors. Officials and executives in Singapore, Beijing, New Delhi and Seoul must avoid the temptation for such vanity deals.
Opportunities abound, though. Several governments are sitting on hundreds of billions of reserves and companies are hoarding cash. Add the desire to grow economies and corporate balance sheets and you have a clear recipe for expansion -- and a huge one as Asia floods markets with more equity than ever amid booming demand for initial public offerings.
This shopping spree will shake up the global power balance like rarely before. Perhaps nowhere is this huge shift more apparent than in tiny Singapore.
(William Pesek is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: William Pesek in Tokyo at wpesek@bloomberg.net
To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net
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