Osaka has little pride in being the third biggest

Press, 4 February 1987, Page 38

Osaka has little pride in being the third biggest

USUKU The Osaka Securities Exchange is the world’s third biggest stockmarket after Wall Street and Tokyo. Bigger than the London Stock Exchange, it is capitalised at 250 trillion yen (SUSI6OO billion); in trading value in 1986, it was worth more than 25 trillion yen. There is no pride in being third. Osaka is more concerned at being second to Tokyo. In 1986, the Tokyo Stock Exchange accounted for 83 per cent of both the value and volume of share trading in Japan. Osaka’s had 12 per cent of the volume and 13 per cent of the value, with the remainder shared between six . other regional exchanges. Tokyo’s share is in part a consequence of its growing dominance over commercial life in Japan. Yet Osaka is the country’s second city. With the surrounding Kansai plain, it produces 20 per cent of Japan’s gross national product. Officials at the Osaka exchange reckon it ought to have an equivalent share of the securities business, though they accept that the pre-war days, when their exchange traded 40 per cent of Japanese securities, are gone forever. Since 1985, Osaka has opened 10 minutes before Tokyo for trading in 140 leading stocks quoted on both exchanges. It has helped a little, but winning more business from Tokyo will be hard. Even medium-sized Osakabased companies are moving . head-office departments, such as finance to Tokyo, further

enhancing the city’s role as Japan’s main capital market Of the 1050 companies listed on the Osaka exchange, only 184 are not listed elsewhere. To compete better with Tokyo, the Osaka exchange has adopted a niche strategy. In 1984, it started a market that aimed to encourage flotations of small and medium-sized firms. It has attracted only 11 companies, with a trading value in 1986 of 67 billion yen. Osaka is considering whether to open a section for foreign company shares in a couple of years time. The Tokyo exchange now has more than 60 stocks in its foreign-companies section, about half of them listed in the past year. They are mostly American and European blue chips. Osaka aims to woo SouthEast Asian and smaller Western firms for its planned foreign-stocks section. Osaka exhange may find life is full of little disappointments, even if it proves cheaper and easier to get a listing there than in Tokyo. For what foreign company large enough to consider a Japanese listing is going to go first to Osaka rather than Tokyo? The often scanty financial information provided by SouthEast Asian companies to their shareholders could also make things difficult for Osaka. The Osaka exchange’s main hope for the future is a quasi-stock index futures market, which is due to open on April 6. This will trade a package of 50 stocks, rather than

an index. It gets round Japan’s legal ban on cashdelivered futures contracts, an anti-speculation legacy of futures scams in the 19305. The Osaka market has selected its 50 stocks to mirror the performance of the Nikkei 225-stock index. The Osaka exchange has the Japanese rights to use the Nikkei 225-stock index for futures trading in Japan. Whether it can use that to boost trading volume in the underlying

shares and so cut into the Tokyo exchange’s trading volume may well turn on what sort of futures contracts the Tokyo exchange itself devises to add to its existing yen-bond futures market. It has a study group due to report later this month. —Copyright, the “Economist”