Nasdaq Japan Is Open for Business
In a further step toward 24-hour global stock trading--and more vibrant capital markets in the still-struggling Japanese economy--Nasdaq Japan opened its doors Monday with the trading debut of eight Japanese technology, multimedia and drug companies.
The move is part of the premier U.S. electronic market’s bid to expand beyond American shores, a race it has joined with its archrival, the New York Stock Exchange.
For Japan, the new market offers a way for investors to channel money into start-up companies that traditionally have been frustrated by structural, cultural and regulatory barriers, analysts say.
It introduces global market standards into Japan’s cozy financial system. And, over time, it could help pare inefficient layers from Japan’s complex distribution system and lower consumer prices by spurring innovation and competition.
“This is great news,” said Eric Nordin, vice president with Bain & Co. Japan. “Japan is screaming out for the opportunity to allocate capital more efficiently.”
Japan’s bank-based financial system and its bias toward established players often have made it difficult for new companies to get started.
For example, Junichi Horie, president of 3-year-old Achaeceth Inc., created a technology that allows consumers to use their debit cards over mobile phones. Business plan in hand, he spent months knocking on bank doors. Most refused outright to listen to him. The few that did insisted he have real estate as collateral.
“Raising capital was very difficult,” Horie said. “I remember thinking, if I had any property, I wouldn’t be trying to get a loan in the first place.”
Horie eventually tapped a personal connection who helped him get a loan. Since then, his company’s shares, in private hands, have soared 16-fold in value, he says. He now hopes to go public on Nasdaq Japan in September at an even higher price.
Nasdaq isn’t the first player in Japan to offer the potential for easier capital access to smaller companies. An exchange run by the Tokyo Stock Exchange called Mothers has 12 listed companies, while Japan’s over-the-counter market boasts 879.
But Mothers has come under fire for setting its listing requirements too low, leading to news reports that at least one of its companies is controlled by gangsters.
The Japanese OTC market, meanwhile, set its bar so high that many young companies failed to qualify.
Nasdaq Japan, a joint venture between New York-based Nasdaq and Tokyo venture financier Softbank, operates as a subsection of the Osaka Stock Exchange. Initially it will use Osaka’s trading system and deal only in Japanese shares denominated in yen. By the end of the year, however, it hopes to link up with Nasdaq’s U.S. system, paving the way for transpacific trading in several U.S. companies.
Nasdaq officials said opening day was reasonably successful, with 651,000 shares trading. The listed firms include drugstore chain operator Sugi Pharmacy, and Internet mail service provider Masternet.
Longer term, analysts say, the success of the market will depend on the quality of companies listed, trading volumes, and the eventual implementation of U.S.-style Nasdaq trading, whereby brokerages, or “market makers,” stand ready to buy or sell shares in companies--providing necessary liquidity that smaller Japanese shares lack.
Success also may depend on Japan reforming its often quirky ways. A key deterrent to broad-based trading, for instance, are Japanese regulations that set high minimum share prices and discourage stock splits.
Nasdaq officials say they are lobbying Tokyo to change these and other structural impediments.
Another fear, analysts say, is that Softbank, as 50% shareholder in Nasdaq Japan, might use its position to cut better deals for firms it wants to list, undermining market credibility. Nasdaq Chairman Frank Zarb scoffed at that suggestion at a news conference Monday.
*
Hisako Ueno in The Times’ Tokyo bureau contributed to this report.
