The merger of the Australian and Singaporean bourses will create the fifth-largest trading group in the world [AFP]

The Singaporean and Australian bourses have announced a merger to create the one of the biggest and most diversified financial trading hubs in the world.

The takeover bid by Singapore Exchange (SGX) at an agreed $3.8bn price for Sydney-based ASX Ltd on Monday will make the new entity the world's fifth-largest listed exchange group.

The two exchanges in a joint press statement said the merger is to ward off the threat of alternative trading systems, seek potential growth and cut costs.

The bid is expected to be completed in the second quarter of 2011 subject to regulatory approval.

The announcement comes with the ASX about to lose its long-held monopoly after the government gave the green light for rival share exchanges to operate in Australia.

The deal, the first major consolidation of Asia-Pacific exchanges, will result in $30m in cost savings.

The merger will "enable customers globally to capitalise on listing, trading clearing and settlement opportunities created through the expanded platforms leveraging on the importance of Asia Pacific as the driver of global growth", the joint statement said.

Growth potential

Magnus Bocker, the SGX chief executive who will become the CEO of the combined group, said the merger will allow investors to ride on Asia's strong economic growth.

"The combination of ASX and SGX offering innovative new products and services to the market will allow customers to maximise future opportunities where Asia Pacific takes centre stage stage globally as the source for capital wealth creation and trading opportunities," he said.

The Wall Street Journal says the merger could create a roughly $1.9tr market.

Reports said the resources-heavy ASX is worth about A$1.38tr, nearly three times Singapore's valuation of about A$560bn.

But SGX is valued at A$7.8bn compared to A$6.1bn for ASX.

This is the second-biggest takeover by a Singapore-listed company abroad after Singapore Telecommunications bought Australia’s Optus Ltd in 2001 for $9.5bn including net debt, according to data from Thomson Reuters.

Source: Agencies