Its reputation tarnished by a series of technical mishaps, the Tokyo Stock Exchange (TSE) is now pursuing a host of global alliances as part of stepped up efforts to safeguard its dominance as Asia's top bourse.
The ink was barely dry last week on an agreement by the Tokyo exchange to partner with the New York Stock Exchange (NYSE) before TSE chief executive Taizo Nishimuro set off for Chicago for talks with the largest US futures market.
As Hong Kong and Shanghai vie for the crown as China's main financial center, Tokyo is looking to expand its global reach to avoid being overtaken by fast-growing Asian rivals.
PHOTO: EPA
"The TSE had no choice but to link with the NYSE, or else China's Hong Kong Exchange would soon catch up and the TSE would become a minor market," said Toshihiro Matsuno, research head at SMBC Friend Securities.
While Shanghai's stock market is still smaller than the Hong Kong bourse, it is rapidly expanding, with the key Shanghai composite index up about 150 percent over the past year.
Chinese companies raised a record 559.4 billion yuan (US$71.7 billion) in the local equities markets last year, an increase of nearly 200 percent, the Chinese government said on Friday.
Daily trading turnover on all Chinese stock exchanges is now running at more than US$20 billion -- a level that rivals the New York and Tokyo markets.
"I think it is positive that the TSE linked up with the NYSE because if it didn't it risks being left out of globalization," said Hiroyuki Nakai, chief strategist at Tokai Tokyo Research Center.
"Many Chinese companies are actively listing themselves on US markets, while Japanese companies are mostly retreating. So I think by linking up with the NYSE and sharing the same rules, the TSE can stop this trend," Nakai said.
Despite Japan's economic recovery after a decade in the deflation doldrums, the TSE is struggling to attract foreign firms, with only 25 now listed on the main Japanese bourse.
"The TSE is trying to appeal to Chinese companies but due to a lack of personnel it has proven difficult to appeal to them on a large scale," TSE spokesman Satoshi Futagi said.
"So we thought our tie-up [with the NYSE] would make the TSE more appealing," he said.
As for the Chinese stock exchanges, foreign companies have been signalling a desire to list there for years, but while Chinese officials have shown they are not opposed to such a move, so far it has been merely talk.
One obstacle is China's closed capital account which makes it hard for companies to repatriate funds raised in China.
As well as the talks with NYSE and the Chicago Mercantile Exchange, the TSE is discussing ways to bolster ties with the London Stock Exchange and Germany's Deutsche Boerse.
The alliance with the NYSE would, for now, focus on technology collaboration and cross-listings by companies, the heads of the two exchanges said at a press conference last week.
In December the TSE agreed on a closer collaboration with Singapore Exchange Ltd.
For now, however, any capital tieups are unlikely as the Tokyo exchange has delayed plans for its own stock market listing until 2009 after a series of technical glitches.
The TSE suffered its worst-ever system crash in November 2005. Then in January last year it was forced to close early for the first time after a scandal at Internet firm Livedoor sparked a wave of selling.
Even so, not everybody is persuaded about the merits of a tieup with the NYSE.
"There is more merit to link up with Asian markets, such as with Singapore or Shanghai," suggested Kenichi Azuma, equity strategist at Cosmo Securities.
"By tying up with an Asian market, the TSE could raise its brand recognition in Asia," he said.
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