Concerns over buyout regulations are overblown, says Tokyo Stock Exchange chief

(Bloomberg) – Japanese Prime Minister Fumio Kishida sent a chill through local markets late last year when he talked about introducing restrictions on share buybacks, but the head of the Tokyo Stock Exchange said that investors had little to fear.

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Hiromi Yamaji, the exchange’s chairman, told Bloomberg TV in an interview that Kishida is unlikely to consider blanket regulations on share buybacks as part of his goals to better distribute the fruits of growth. economic.

“Kishida takes a fairly cautious stance on uniform regulation of share buybacks, as it takes into account each company’s individual circumstances and decisions,” Yamaji said. “I don’t think it will impact capital markets.”

Kishida’s ‘new capitalism’ has been a major theme for investors in Japan since he became leader last fall, and it’s a dramatic step up from a decade of more pro-government neoliberal policies. market under its predecessors. The Prime Minister’s speech on capital gains tax hikes continues to weigh on Japanese markets: The Topix index has fallen nearly 8% since taking office, outpacing the fall in Japanese stocks. Asia-Pacific over the period.

Kishida also said last week that moving away from “shareholder capitalism” was an important idea worth considering.

Market-Roiling Kishida Sticks to Japan’s ‘New Capitalism’

Nomura Holdings Inc. veteran Yamaji, who previously ran the Osaka Stock Exchange, took over as chairman of the Tokyo stock exchange last April after his predecessor resigned following a trading breakdown.

Here are the other key comments from the interview with Yamaji:

Market reform

A long-awaited reshuffle of the TSE’s market segments which takes effect in April has so far largely fallen flat, with more than 1,800 voters set to join the new “Prime” section, which will replace the current first section which constitutes the reference. Topix index.

Investors have expressed disappointment that more minnows have not been removed from the list. But Yamaji urged investors to be patient and focus on the potential for improved standards, rather than just the number of companies.

Companies that are part of the core segment will have to work harder on their corporate governance and keep foreign investors in mind, he said.

PSPC

One specific area that Kishida has highlighted to drive growth in Japanese markets has been the introduction of special purpose acquisition companies, which are currently not permitted in the country’s markets.

While Singapore has also recently started offering the vehicles, there are fears that investor interest in SPACs is already waning in the United States. Yamaji played down concerns that Tokyo was late to the party.

“It is possible to make SPACs possible in Japan,” he said. “There is no use discussing it now, even if it seems a bit too late.”

Yamaji said it was important to promote fundraising diversification for unlisted companies, and Japan Exchange Group formed a study group last year to discuss the issue. Yamaji also stressed the need to provide protections for those who are most likely to buy new listings, as “in Japan, the main investors in the IPO market are individual investors.”

Registrations abroad

One of the Tokyo Stock Exchange’s areas of success in recent years has been the growing number of overseas listings. While the exchange has struggled to attract the kind of big listings it once sought, like Saudi Arabian Oil Co., a growing number of Asian startups with ties to Japan are showing interest.

Artificial intelligence startup Appier Group Inc. has become the first Taiwanese company in more than 20 years to list in Tokyo when it goes public in 2021. A total of five “cross-border companies” were listed in Tokyo the last year, Yamaji said.

As a result, “we are getting more and more inquiries, as well as requests for advice,” Yamaji said. “For cross-border companies with ties to Japan, listing on the Tokyo Stock Exchange would be an optimal way to enhance company value.”

Foreign investors

While foreign listings may rise, Japanese stocks have recently struggled to attract overseas investors in the shadow of China’s growing power.

Foreign investors still make up the bulk of Japanese transactions – up to 65% in the cash equity market and 75% in derivatives – but Japanese markets still need to increase their appeal to foreign investors, for example by offering more services in English. disclosure of Japanese companies, he said.

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