JPX shakes up to kick out losers
Over 80% of 2,184 listed firms on the First Section of the Tokyo Stock Exchange will remain in the highest trading tier in a reorganisation plan to be implemented April 4, according to recent data from a research institute.
Bourse operator Japan Exchange Group Inc, known as JPX, is attempting to improve market availability and lure foreign investment through the new scheme, which will see its current four trading sections restructured into three — the “Prime,” “Standard” and “Growth” sections.
The final list will be announced on Jan 11.
The Prime section, equivalent to the current First Section, will have greater focus on liquidity with an eye to attracting a variety of institutional investors.
The envisioned reform comes as Japan seeks to boost its global standing as a financial center by increasing its attractiveness to foreign investors, who have a powerful presence in the market, through strictly screening topperforming listed firms.
About 10%, or 208 companies, have selected the lower tier sections so far, with the total expected to number approximately 300 businesses, according to data compiled on Dec 15 and analyzed by Daiwa Institute of Research Ltd.
Meanwhile, the Standard section will be created through the merger of the Second Section and the Jasdaq, a market mainly for midsize companies. The Mothers market for up-andcoming companies will be renamed the Growth section.
Companies are required to fulfill criteria according to each sector, including a certain amount of floating shares and market capitalisation.
However, firms that have failed to meet the benchmark for the top-tier Prime were able to submit a business plan demonstrating growth to meet the necessary standards. At least 163 companies have been accepted into the top-tier section after doing so, according to the data.
One of them was menswear business Konaka Co.
The firm would have qualified on sales and share price a few years earlier, and submitting a growth plan was a “message to our shareholders that we will avoid falling into the Standard section by restoring earnings,” a Konaka executive said.
Meanwhile, sushi restaurant chain Genki Sushi Co, currently listed on the
First Section, said it selected Standard due to the company’s low ratio of foreign investors.
In July, approximately 30% of
businesses on the First Section, or about 660 firms, reportedly failed to meet the stricter listing criteria to enter the Prime sector, based on notifications
by JPX.
“The market is unlikely to drastically change,” said Atsushi Kamio, a researcher at Daiwa Institute.