A Japanese government advisory panel is looking to limit the companies listed on the first section of the country’s exchange to those with a tradable float of at least ¥10bn ($91mn), in an effort to boost liquidity.
In a draft report released yesterday, the panel from Financial Services Agency said the changes could start in the first half of 2022. The Nikkei reported the cutoff float earlier.
First section companies are currently required to have a market capitalisation of at least 25bn yen and tradable float of 35%. While current guidelines require those trading on the second section to have minimum tradable shares of ¥1bn, there’s no equivalent standard for the first section.
“Companies that do not meet this cutoff marginally would have to sell off some of their stakes or issue new shares to increase tradable float,” said Justin Tang, head of Asian research at United First Partners, an investment and advisory group that specialises in special situations. “Companies that are too far off might just decide to privatise or privatise their listed subsidiaries.”
Tang said any drastic changes by companies would be “unlikely,” given most of the companies in the first section already meet the criteria.
The panel is also recommending the Tokyo Stock Exchange reduce its sections to three from five. A new section for “Prime” companies would be for the biggest and best-governed stocks.
A market structure specialists’ group at the FSA has been holding meetings to discuss possible changes to the TSE, with the most recent gathering held in November. Market participants have been closely eyeing whether it could also slash the number of companies in the country’s benchmark index, which currently has more than 2,100 firms, many of which are small and difficult to trade due to low liquidity.
The proposed changes are “still too small for many/most large fund managers,” said Travis Lundy, a special-situations analyst who writes for Smartkarma. And it’s “not entirely clear that Prime will have to have the same minimum criteria for new listings as for section transfers,” he said.
A view of the Tokyo Stock Exchange, operated by Japan Exchange Group. In a draft report released yesterday, a Japanese government advisory panel from Financial Services Agency said the u00a510bn limit to tradable float could start in the first half of 2022.
