As part of an effort to streamline markets and attract more investors, the Tokyo Stock Exchange (TSE) might demote about one-third of its largest listed companies and cut down the bourses it operates from four to three, local media reported on Friday.
A TSE advisory panel is expected to compile a report by the end of this month, after examining public comments on structural reforms for the US$5.7 trillion equity market.
The reported changes would demote hundreds of companies from the TSE’s First Section, investors said.
Photo: Bloomberg
The exchange included 2,137 companies as of Thursday — double the number in 1990, the exchange’s parent, Japan Exchange Group Inc, said.
“It’s good to reduce the number of companies in the TSE’s First Section,” said Kazuyuki Terao, the chief investment officer of Allianz Global Investors’ Japanese unit. “A lot of investors are using the TOPIX as a benchmark for their investments and the number of the constituents in the TOPIX is too many.”
The TSE might raise the minimum market-cap requirement to remain listed on the First Section to ￥25 billion (US$224 million) from ￥2 billion, and require companies disclose filings in English, the Nikkei Shimbun said on Friday.
Kyodo News reported the panel plans to recommend reducing the number of exchanges.
Japan Exchange Group spokesman Satoshi Mimura said that no decision has been made.
About half of the TOPIX’s members have market values below ￥50 billion.
If the ￥25 billion market cap threshold were to be implemented, it would cut the first board to a little more than 1,400 companies, according to data compiled by Bloomberg.
The panel is proposing categorizing TSE stocks into three sections — premium, standard and emerging, according to the Mainichi Shimbun , which did not say where it got the information.
The TSE has the First and Second Sections, the Mothers and Jasdaq start-up exchanges.
Companies on the First Section that are near the market cap threshold might seek mergers and acquisitions or management buyouts, Masahiro Suzuki, an analyst at Daiwa Securities Group Inc, wrote in a note on Friday.
Some investors saw the reported changes as unwelcome.
Masakazu Hosomizu, a Chicago-based portfolio manager at RMB Capital, said splitting the First Section by market cap would “fundamentally alter the constituents of the TOPIX” and “force a massive sell-off by passive investors due to their portfolio rebalancing requirement.”
Yoshinori Shigemi, a Tokyo-based global market strategist at JPMorgan Asset Management, said screening companies just by their market cap is not desirable.
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