Seminar in Osaka by the London Stock Exchange
On December 12th, the London Stock Exchange (LSE) held its first seminar in Osaka to promote London as a secondary listing market. Osaka may have become a little more interesting to the LSE since the break up of the Osaka Exchange’s partnership with Nasdaq. Moreover, the accounting scandals in the US have tarnished the image of the US regulatory regime. Without doubt therefore the LSE is keen to push its services more strongly, taking advantage of the problems for its competitors in the US.

The seminar featured presentations by Dan Cruickshank, Chairman of the LSE, and James Woodley, Regional Manager, International Business Development. They outlined several of the LSE’s strengths as follows:

LSE’s Strengths
1.London has 5 times more trading in Japanese equities than New York.
2. Up to the end of November 2002, 75% of all the IPOs in Europe took place on the Exchange, which was more than the NYSE and Nasdaq combined.
3. More Japanese companies are listed on the LSE than any other exchange
4. The LSE has the largest number of international investors(more than the NYSE)

International Features of the LSE
1. 70% of trading on the Exchange is accounted for in a currency other than Sterling
2. The Yen accounts for around 6% of transactions (the Euro 40%).
3. 26 Japanese companies are listed on the Exchange, and 93 Japanese stocks trade on the LSE international trading system, SEAQ International.
4. A total of 183 debt issues are traded by 60 Japanese companies.

Why London for a listing
According to the LSE’s representatives, investors in the West are willing to pay a premium for good corporate governance of around 12-14%. In the LSE’s view, the UK’s listing and governance rules, which are supervised by the Financial Services Agency, and not the LSE directly, strike a balance between effective regulation and over-regulation. In the US, on the other hand, the advent of the Sarbannes-Oxley Act has created a large number of new rules with provisions for extra-territoriality, which the LSE believes will be a handicap for companies considering a listing in the US.

The LSE’s success in attracting a large number of international companies already to list gives new issuers more visibility. There were 470 international companies listed on the LSE, which is more than any other exchange, including the NYSE.

Another strength of London is that it has the largest number of international equity funds under management in the world. It has therefore a sophisticated investor base, dominated by institutions, with about 1,000 connected by terminals to the LSE. The second largest investor pool in Europe is Paris, which is only one-sixth or less the size of London.

Japanese companies can trade in Yen on the LSE whereas in the US they have to trade in dollars or in depository receipts. The convenience of trading in Yen means that Japanese investors can buy in London and sell in Tokyo the next day.

The LSE argues that European institutional investors are also much more open to invest in non-domestic shares, because they actively invest already in other EU stock markets and are used therefore to dealing with different regulatory and settlement systems. US investors on the other hand, the LSE says, have a much wider choice of investments domestically and are therefore less active investing outside the US. A further characteristic of the US market is that the investor base is more retail-oriented, hence less sophisticated, and likely to be shorter-term holders of stock.

The London TechMark market
The Techmark is not strictly speaking a market, but a means of bringing together companies, already listed on the LSE, into a single high-tech category. There is also a similar market called MediScience, which started in 2001 for bio-related, pharma, and life science companies.

The AIM market
The Alternative Investment Market is the LSE’s market for start-up companies, similar to the TSE’s Mothers market. There are 700 companies listed (the Jasdaq market has around 950) of which 50 are international. The average market capitalisation of stocks listed tends to be between $3m and $15m.

Investor Relations
The fact that London is such an important centre of investment means that it is also the most important centre for Japanese companies’ IR activity.

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