When Australian Treasurer Wayne Swan declared his decision to reject Singapore's proposed takeover of the local bourse a "no brainer", critics fear he may have scared off future Asian investment.
The Australian Securities Exchange (ASX) and Singapore Exchange (SGX) announced plans in October to merge, hoping to create one of the world's largest financial trading hubs and a rival to Hong Kong.
But the Aus$8.4 billion ($8.8 billion) proposal hit opposition almost immediately, with Canberra lawmakers raising concerns about foreign ownership and Singapore's human rights record.
Swan's remarks in finally blocking the deal on Friday were unequivocal.
"Let's be clear here: this is not a merger. It's a takeover that would see Australia's financial sector become a subsidiary to a competitor in Asia," he said.
"It was a no brainer that this deal is not in Australia's national interest."
Swan said the tie-up would have damaged Australia's "economic and regulatory sovereignty", and come at the risk of many financial sector jobs.
Nor would "becoming a junior partner to a smaller regional exchange" provide a gateway to Asian capital flows because the Singapore exchange had only limited links to the rest of Asia, he added.
Australian stockbrokers welcomed the government's decision, which was backed by the Foreign Investment Review Board, saying the proposal had posed a threat to the nation's ambitions to become a regional financial services centre.
But the rejection of the takeover comes amid intense consolidation within world markets, and Swan's critics said the failure of the Singapore bid would limit the Australian bourse's ability to compete globally.
Matt Robinson, senior economist at Moody's Analytics, said the harm would not stop at the market, with the decision sure to dent Australia's reputation as a destination for foreign capital.
"Rejection on the grounds of loosely defined national interest generates a potentially toxic degree of sovereign uncertainty regarding future M and A (mergers and acquisitions) activity involving Australian companies," said Robinson said in a written commentary.
"The decision has likely damaged Australia's reputation as a destination for foreign capital and will discourage foreign investors from considering future opportunities in Australia."
Asian markets specialist Tony Naughton said it was a politically driven decision, with the ruling Labor party at an eight-year low in the polls and keen to make a show of strength.
"The gist of it is 'leave us alone, we're getting on quite nicely', obviously with the exchange rate at the moment, a still strong-going economy, demand for resources, we're very self-sufficient," said Naughton, head of economics at Melbourne's RMIT University.
"But the signal that I think's been sent is that we're isolating ourselves and we're too proud of what we do and we don't want others interfering," he told AFP.
"I think it might reinforce what I perceive to be a view that Australia's a nice place, but Australians are not really part of Asia."
Professor Ian Harper from Deloitte Access Economics, which helped the ASX build its national interest case for the takeover, said Swan's remark last Tuesday that he was inclined to bar the deal would puzzle Asia.
"I think it would clearly raise eyebrows in Asia as to what it is that we're on about down here," he told ABC Radio last week.
"I mean, we have a relationship with Asia but it's overwhelmingly about exporting commodities into Asia and importing manufactured goods from Asia. Surely there's more to it than that."
The failed merger could also prompt local companies to list overseas rather than in Australia, said Reuben Buchanan, director of private investment platform Wholesale Investor.
"The amount of money that's here for companies to tap into is limited," he said. "The government needs to wake up and get with the times."
Ian Murray, executive chairman of mid-tier exploration company Gold Road Resources, said a Singapore tie-up could have simplified the process for firms such as his to tap into strong investor interest from Asia.
David Gonski, chairman of ASX Limited, refused to comment on whether the scuppering of the deal would hurt Australia's reputation but said Australia should be involved in a much wider dimension than just "Australia onshore".
"We will be looking for some sort of a world view and we will do it obviously consistently with the law," he said. "Affiliations come to mind but that's ahead of us."