Tokyo is increasingly beating Hong Kong, Taiwan, and Singapore for IPO listings.
On June 29, plastics manufacturer Omni-Plus System (OPS) debuted Japanese depositary receipts (JDRs) on the Tokyo Stock Exchange (TSE) Mothers Index, to become the first company based in Singapore to launch its IPO in Japan.
The TSE’s Mothers section is focused on emerging stocks and high-growth startups. Trading volumes in the section totaled $400 billion in 2020, which was more than 40 times the amount for similar boards in Hong Kong and Singapore, according to a June 30 Nikkei Asia report.
According to CEO Marcus Neo, it was a natural choice from the moment four years ago when the company decided to do an IPO. “We didn’t choose the US or Europe, because we are still an Asia-based company,” Neo says. “We considered Hong Kong, Taiwan, and Tokyo.”
In choosing to list in Tokyo, Neo’s team considered the comparatively high price/earnings ratios on the Mothers, compared to equivalent boards on the Singapore Exchange—as well as the TSE’s relative transparency and rules-based listing process itself, which is similar to that of Singapore. “The [TSE] is one of the biggest Asian stock exchanges,” Neo adds, “during the IPO, liquidity was good.”
By debuting JDRs instead of listing directly on the TSE, OPS could tap into individual investors, who make up the majority of investors in the Mothers section. Unlike foreign stocks, JDRs can be traded as Japanese stocks without the need for a special brokerage license, thereby opening up greater access to investors and capital markets. More than two dozen companies in Asia are set to follow OPS with their own Tokyo listings.
“These developments show the natural strength of the Japanese financial system, its deep pools of investment capital, its rule of law and its rapidly growing and improving culture of corporate governance,” comments Frank Packard, an independent adviser and chair of the Alternative Investment Committee of the American Chamber of Commerce in Japan.