Top Financial News
Tue, 15 Jun 1999, 8:21am EDT
Softbank, NASD Planning to Launch Japanese Version of Nasdaq Stock Market
By Gary Schaefer
Softbank, NASD Plan Japanese Version of Nasdaq Market (Update3)
(Adds details from Tokyo news conference in 1st section.)
Tokyo, June 15 (Bloomberg) -- Softbank Corp. and the
National Association of Securities Dealers plan to create a
Japanese version of NASD's electronic, dealer-run Nasdaq Stock
Market, which may start operating next year.
Softbank, a Japanese Internet investment company, and the
industry group that operates the second-largest U.S. stock market
will form a 600 million yen ($4.9 million) joint venture to
provide an electronic venue where both Japanese and U.S. brokers
can trade shares in companies from both countries, including such
well-known Nasdaq members as Microsoft Corp. and Intel Corp.
''We're hoping to bring Japanese investors the opportunity
to invest in some 5,000 U.S. growth stocks, and to provide a
forum where growing Japanese companies can raise capital smoothly
and find fertile ground for their share offerings,'' Softbank
said in a statement.
The 50-50 venture, called Nasdaq Japan Planning Co., will be
established this month and aims to begin trading by the end of
next year.
Nadsaq was founded in 1971 and today lists shares in 4,449
companies. NASD Chairman Frank Zarb, who is in Tokyo discussing
the plan with Japan's Ministry of Finance, attended today's news
conference.
Approval by Japanese government regulators is expected to
weigh heavily on the timing of the market's launch. Organizers
will likely need to secure agreements on listing requirements,
and on permitting U.S. citizens to trade stocks on the market
through U.S. brokers.
Softbank has built itself into one of the biggest financiers
of the Internet economy by betting large amounts on promising
U.S. online ventures such as Yahoo! Inc. before they go public
and then using its online winnings to finance new investments.
It has stakes in more than 100 unlisted Internet companies,
and billionaire founder Masayoshi Son said last month he expects
seven Softbank affiliates to go public in the next six months.
The launch of a new electronic market may contribute to the
development of online stock trading in Japan, a nascent business
is expected grow as the Japanese government deregulates the
nation's securities industry.
''The Internet is set to become the medium of choice for a
new generation of discount brokerages in Japan,'' said Hiromi
Koyama, an analyst at Taiheiyo Securities Co. ''A Japanese Nasdaq
will give people one more reason to go online.''
A Financial Amazom.com?
Softbank is the biggest shareholder in E*Trade Group Inc.,
the No. 2 U.S. online brokerage, and has positioned itself to
become a force in Japan's emerging market for online financial
services by setting up Japanese ventures with E*Trade and
investor information service Morningstar Inc.
Those partnerships may help Softbank establish itself as
''an Amazon.com for the Japanese financial-services sector,''
wrote Mahendra Negi, an analyst at Merrill Lynch Japan Inc., in a
recent report.
With the Japanese government set to allow brokerages to
offer competitive commissions for small-lot stock transactions
beginning this October, 1999 is being touted as ''Year One'' for
Internet trading in Japan.
There still are only about 60,000 online trading accounts in
Japan, a fraction of the 8.5 million accounts in the U.S., where
a third of all individual stock trades are conducted over the
Internet, according to U.S. Bancorp Piper Jaffray, which tracks
the industry.
The emergence of Internet stock trading has been slowed by
low diffusion of personal computers and high Internet access
fees, plus the recent woes of the Japanese stock market, which
slipped near a 13-year low as recently as last October.
Credibility
Softbank founder Son is betting Japan will follow in the
footsteps of the U.S., albeit three to five years later.
''We're creating our own online financial industry,'' he
said last month.
He's not alone. As many as 27 Japanese securities companies
provide Internet trading services, and top U.S. online brokerage
Charles Schwab Corp. is preparing to enter the fray.
E*Trade Japan was set up in July 1998 but isn't planning to
begin operations until Japanese brokerage commissions are
deregulated in October.
Softbank's affiliation with a Japanese Nasdaq may also make
the company more attractive as a partner for Internet ventures.
''The positive development for Softbank is that it gives
them more credibility,'' said Merrill's Negi, who rates
Softbank's stock ''buy.'' ''A startup company here in Japan which
is considering taking venture capital financing from (several)
investors might actually opt for Softbank because they think they
are going to able to list on this Nasdaq Japan market.''
Not Another Jasdaq
Japan's over-the-counter index, Jasdaq, bears little
resemblance to Nasdaq aside from its name. Dominated by low-tech
manufacturing and service industries, most of its 851 members
have a market value of less than 10 billion yen, and some go
untraded for weeks at a time.
NASD Chairman Zarb, who is in fierce competition with the
New York Stock Exchange and electronic trading networks such as
Reuters Group Plc's Instinet Corp., has been pursuing
affiliations with eight international stock markets on four
continents. He has said his goal is to forge links that would let
companies trade their shares around the world.
Nasdaq and the Stock Exchange of Hong Kong said in December
they agreed on the first steps of what could be a broader
alliance between the two markets. Zarb also said in April that
NASD plans to open a Shanghai office next year to recruit more
Chinese companies to list on Nasdaq.
Softbank, Japan's largest distributor of computer software
and peripherals, has built itself into one of the world's largest
financiers of Internet businesses on the foundation of a series
of early investments in fast-growing online companies such as
E*Trade and Yahoo! Inc., the No. 1 Internet search service.
Softbank's stock today fell 2.8 percent to 17,480 as a
tumble on Wall Street by U.S. affiliates including Yahoo and
E*Trade raised concern its own shares may be overvalued. Softbank
soared 19 percent last week following a bullish forecast by
Lehman Brothers Asia Inc. analyst Ravi Sarathy, who set a one-
year target of 41,600 yen for the stock.
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