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Tokyo takes time for Aim presence

Tokyo Aim, Japan’s newest exchange, is not escaping the scepticism that enveloped its London equivalent when that junior market was established nearly 15 years ago. The new bourse is a joint venture between the Tokyo and London stock exchanges and based on the LSE’s own Aim market.

The TSE hopes that it will build up a new set of companies that can eventually grow into some of Japan’s leading names, encourage more risk capital and make the Tokyo a more global financial centre through foreign company listings.

Atsushi Saito, TSE chief executive, has said the names of Japan’s top 100 companies have not changed much over the past half century, unlike in the US or Europe, and that Japan needs this “energy” to stay relevant. The LSE’s ambitions are about being part of the growth story in Asia and expanding its brand.

Sceptics question whether or not Japan needs another start-up market when it already has seven and also whether it can lure overseas companies to list on it.

“It is difficult to see what yet another market will bring to Japan if it is just another start-up exchange,” said Neil Katkov, head of Asia research at Celent, the finance research and consulting firm. “However, if they are looking for a niche to differentiate themselves, then it could be a different story.”

Tetsutaro Muraki, Tokyo Aim’s bilingual chief executive, is confident about that differentiation. He says the market is also targeting the subsidiaries of large-cap companies, overseas companies, fundraising for project finance and large unlisted companies that want to raise funds through preference shares.

It has received more than 100 inquiries, ranging from an e-mail to more serious communication, from companies both domestically and overseas.

He sees clean energy, technology and biotechnology as among the mainstays of the market.

Mr Muraki is in no rush, expecting about five listings in the first year, and he does not expect to break even for the first four or five years.

“I’d rather build a reputable exchange that grows over time, versus bringing a less qualified company to the exchange in the current market,” he said.

Tokyo Aim is restricted to professionals and overseas investors, unlike the main start-up markets, which Mr Muraki says are dominated by retail investors who can often be speculative by nature.

“The real issue is if Tokyo Aim can bring the companies that are interesting enough to investors for a long period of time,” Mr Muraki said. “It’s not a short-term type of trading that you often see on the Japanese growth markets.”

There is also a question mark over Tokyo’s presence as a global financial centre, in spite it having the second-largest stock market in the world.

Listings of foreign companies on the TSE have dwindled to a mere 15 from a peak of 127 in 1991. Now the question is how Tokyo Aim will lure in overseas companies.

It will face regional competition from the Growth Enterprise Board of Shenzhen, China, which is expected to be launched in the coming months, and other Asian bourses are unlikely to sit back and watch.

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To be globally competitive, disclosure on Tokyo Aim can be made in English and it also allows the use of International Financial Reporting Standards to encourage overseas companies to list on the market.

It is likely to attract those companies with business operations or customers in Japan as well as being attracted by the large pool of capital in Japan, Mr Muraki said.

David Shrimpton, chairman of Tokyo Aim and from the LSE side of the link-up, says: “There is a huge amount of capital in Tokyo and that creates a really powerful listing story for Asian regional companies, which we wouldn’t be able to provide on our own.

“My personal view is that we wouldn’t have been able to start this venture on our own and I don’t think TSE would have been able to either, which is why this is a joint venture.”

James Halstead, a partner at Morrison & Foerster in London, during a visit to Tokyo meeting Japanese nominated advisors said: “People were initially sceptical about London Aim, and it will probably be a similar process for Tokyo. The correct measure of its success, however, will be where the market is in five or ten years time not five or ten months.”

Source: Financial Times,30.06.2009 by Lindsay Whipp

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London Stock Exchange has signed shareholding with Tokyo Stock Exchange on TOKYO AIM Joint Venture

Further to its announcement on 29 January 2009, the London Stock Exchange plc is pleased to confirm that it has now signed a shareholders’ agreement with Tokyo Stock Exchange Group, Inc. (“TSE”), which formalises the funding and governance of the joint venture company to develop TOKYO AIM, a new market for growing companies in Japan and Asia.

TOKYO AIM, Inc. will be owned 51 per cent by TSE and 49 per cent by the London Stock Exchange and will be incorporated and operated in Japan. The London Stock Exchange will invest Yen 980 million in cash (approximately £7 million) into TOKYO AIM. This will form 49 per cent of the Yen 2 billion (approximately £14 million) gross assets of TOKYO AIM, which will fund the regulatory capital and medium term trading requirements of the company.

TOKYO AIM will combine TSE’s knowledge of the region and the London Stock Exchange’s growth market expertise, enabling it to offer the highly successful AIM model to a wider range of Japan and Asia’s growth companies. This will provide these companies with access to a capital market specifically tailored for their needs and to a wider investor base, while creating new investment opportunities for Japanese and international professional investors.

It is envisaged that TOKYO AIM will commence its operation after receiving its market operator’s licence from the Japanese Financial Services Agency.

David Shrimpton will be Chairman of TOKYO AIM, and Tetsutaro Muraki will be Chief Executive. Marcus Stuttard and Hiroki Kurihara will also be directors of the company.

Source: MondoVisione, 14.05.2009

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