The Tokyo Stock Exchange (TSE) will abolish its foreign section in February 2005, as part of its effort to attract more foreign firms to list on the exchange – and especially firms based in Asia. At present, only two Asian firms, one from Hong Kong and one from Malaysia, are listed on the TSE. There are 16 Chinese firms listed on the New York Stock Exchange (NYSE). In all, 30 foreign stocks currently listed on the foreign section will be integrated into the “first section” of TSE.
A spokesman for Bank of Tokyo Mitsubishi (BTM) in Tokyo says the integration will be more convenient for both investors and issuers. After the Japanese bubble burst in 1990, the number of foreign firms listed on the TSE’s foreign section declined significantly, from a peak of 127 in 1991 to just 30 today. In abolishing the distinction between foreign and domestic stocks, the TSE is also following the example set by the New York Stock Exchange (NYSE) and the London Stock Exchange.
The BTM spokesman adds that TSE will also revamp the market reporting system for securities companies by the end of this year. By listing stock information of the same sector altogether regardless of its nationality (e.g. IBM and Sony), it expects individual investors to become more familiar with foreign stocks.
Listing criteria for the first and second section will be determined by the exchange’ new listing standards such as trading volume in their home countries. In the current system for domestic companies, TSE reserves the first section for ‘blue chips,’ while the second section is for smaller companies with lower trading volume levels.
Along with the abolition of the foreign section, the Financial Services Agency (FSA) is also planning to allow foreign firms to disclose financial statements in English from 2007. The TSE hopes this will reduce the listing cost burden imposed on foreign companies.