Nasdaq Japan takes modest first step, outlook firm

Nasdaq Japan takes modest first step, outlook firm
Keiko Kanai

OSAKA, JUNE 19: The Japanese sibling of the tech-studded US Nasdaq market opened its doors on Monday, inviting investors and listing aspirants into an era of opportunity but ushering in new competition for other markets.

"We are about to take a very, very important step in the world of financial activity," National Association of Securities Dealers (NASD) chairman Frank Zarb said at the opening ceremony.

"In a little more than a year's time, we will have a stock market here that will be an important set-piece for all of Asia -- a market that is interconnected by way of the Internet not only to the rest of Asia, but to all of the Americas and all of Europe," he said.

The launch of Nasdaq Japan puts co-founder NASD -- parent of the US Nasdaq -- one step ahead of the New York Stock Exchange in the race to create a 24-hour global market.

The new market, launched jointly by NASD and Japan's leading Internet investor Softbank Corp as a new section of the Osaka Securities Exchange, is expected to see some 70 issues traded on the market by the end of the year.

SMALL BEGINNINGS, BIG AMBITIONS: "We are starting very small, and we are starting very carefully and for the rest of the next year, we will be building very carefully," Zarb said. But the market clearly has ambitions.

"The result is that companies all over the world will be able to raise capital outside their home country, that investors will be able to invest in companies outside their home country," he said. "This is the first time such a step has been taken." The highly publicised launch, however, was marked by a moderate share price performance with some investors inclined to watch and wait to see if the market functions without glitches.

Officials said there were no problems. "I'm glad we managed to get the market started smoothly,"said Softbank chief Masayoshi Son. "It's like having a new baby." Trading was also subdued because of a lack of big high-tech names in the first group of companies.

Eight companies -- four initial public offerings (IPOs), two ex-OTC (over-the-counter) issues and two dual-listings with conventional markets -- started trading. All are seen as financially sound but not necessarily glamorous.

Job agency Creek & River Co Ltd, an IPO stock, ended at 3.48 million yen, down from its IPO price of 3.5 million yen, while game software distributor Digicube Co Ltd, which left the OTC market for Nasdaq Japan, closed at 2.8 million yen, down from last week's close at 2.85 million yen.

One notable exception was Sugi Pharmacy Co Ltd, which rose by its daily limit of 1,000 yen to 9,000 yen. The growth potential of drug stores in a country with a rapidly ageing population attracted investors.

After an initial listing rush on Monday, online investment adviser Morning Star Japan KK will become the first Softbank unit to join Nasdaq Japan on Friday, followed by other cyber firms in the Softbank group.

Softbank's strong presence, however, is a mixed blessing for the new market, helping raise its profile with attractive listing candidates on one hand, but stoking worries the Internet investor may use it as a personal vehicle for floating its group firms.

Nasdaq Japan's Zarb sought to play down those concerns. "The fact is that in the Nasdaq market in the United States, we have a lot of IPOs from Merrill Lynch, Morgan Stanley Dean Witter. All of them have a piece of Nasdaq. We regulate them. We are very very good market from the standpoint of integrity."

Nasdaq Japan is expected to benefit from Japan's increasingly fierce inter-market competition, helped by its well known brand name and advanced technology. "Nasdaq (Japan) has got two big advantages. One is the name. The brand. The US Nasdaq," Gary Evans, strategist at HSBC Securities told Reuters Television.

"It's also potentially got the technology although it seems that it hasn't yet. It's got to be a year away from implementing full US technology... So I think, given that, Nasdaq's probably one of the survivors."

Nasdaq Japan is using the OSE's trading system initially, and this allows only auction-style transactions. But it plans to introduce a new trading platform early next year that would give investors a US Nasdaq-style market-maker system, as well as the existing auction system.

Investors were quick to point out that a snap judgment may be unwise on the long-term prospects of the new market based on its first day because some attractive prospects are in the pipeline.

Zarb also said he hopes to see selected US Nasdaq-listed firms start trading on Nasdaq Japan "between now and the next six months." Seven high-profile issues listed on the US Nasdaq, such as Microsoft Corp and Intel Corp, made a lacklustre debut on the Hong Kong Stock Exchange last month.