Just when the nation’s bourses are locked in a heated race to get startups listed, another possible competitor has emerged — this time from Hong Kong.
The Hong Kong Stock Exchange held a financial seminar last week in Tokyo in an attempt to recruit startups to list on its Growing Enterprise Market, established in October and expected to begin operations by the end of the year.
The seminar was also aimed at luring investors to Hong Kong, Asia’s second-biggest financial center after Tokyo.
GEM could compete with such markets as Mothers, the Tokyo Stock Exchange’s brainchild launched earlier this month, and Nasdaq Japan, a U.S.-Japan joint venture to debut in late 2000, as well as the over-the-counter stock market run by the Securities Dealers Association of Japan.
All of these markets feature looser listing requirements than conventional bourses to attract startups, especially in the high-technology field.
“We do welcome Japanese companies,” Lawrence Fok, senior executive director of the regulatory affairs group at the Hong Kong Stock Exchange, said during a recent visit to Japan. “If they feel Hong Kong is a good gateway or a stepping stone to increase their exposure to investors in that region, then listing in Hong Kong should be considered.”
Only a few Japanese firms, including supermarket chain Jusco Co. and its credit card affiliate Aeon Credit Service Co., are currently listed on the Hong Kong Stock Exchange.
While Hong Kong’s main market only lists firms with a proven track record, GEM will welcome companies that are in the red but likely to reap huge profits in the future.
GEM is similar to Mothers or Nasdaq in that, while listing is easy, disclosure requirements will be stringent.
Firms in GEM will have to disclose their financial results every quarter, as opposed to twice a year for companies on Hong Kong’s main market. They will also have to set business objectives when they go public and keep investors informed on their progress every six months.
But won’t additional bourses cause excessive competition among stock exchanges?
Fok says he believes different markets can coexist because “the pie is getting larger and larger.”
Every stock exchange has its niche and serves the different needs of investors, he said, noting that Hong Kong wants to play the role of China’s window to the world.
Japanese firms that have operations in Hong Kong or mainland China would find it helpful to list both in Japan and Hong Kong, he said.
Still, stock exchanges must keep up with technological changes and seek alliances with other bourses in order to survive, Fok said.
For its part, the Hong Kong bourse has tied up with the U.S. Nasdaq and plans to introduce U.S. Nasdaq stocks to Hong Kong investors in the future.
The stock exchange will also change from a membership organization into a shareholder company next year — a step many exchanges around the world have taken.
All in all, competition is good for stock exchanges, Fok said.
“Of course, there is competition (among markets),” he said. “But competition on what? Competition on quality, on transparency, on fairness, on a level playing field. All of these are very good elements of competition.”
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