Shanghai market looks to Tokyo ties


Shanghai has emerged as the largest market in China, with the Shenzhen bourse relegated to a still-unclear supporting role

By Alex Frew McMillan

HONG KONG, China (CNN) -- The Shanghai Stock Exchange hopes to link with stock markets in Japan, a move that would likely lead to companies listing in both China and Japan.

The Tokyo Stock Exchange is keen to tap the growth potential of its smaller Shanghai counterpart. That is expected to lead to the two markets signing a mutual cooperation pact in 2002.

A top official with the Shanghai exchange confirmed to the Asian Wall Street Journal that the stock market will send a team to Tokyo and Osaka in September to visit potential listing candidates.

The delegation will target Japanese companies that operate both joint venture and subsidiary operations in China, to encourage them to raise capital in China.

The unnamed official said the plan is a "first step" for the exchange to internationalize itself. Japan's stock markets are keen to tap the rapid growth anticipated for China's equity market.

First set of talks in June

The Shanghai exchange is keen to broaden its horizons and improve the quality of listings it carries. More and more Japanese companies are operating in China and are likely to want to raise capital there.

The visit is part of ongoing talks on cooperation. Officials from Shanghai visited the Tokyo Stock Exchange in June, according to the Nihon Keizai Shimbun.

The business daily reported last week that the TSE and Shanghai markets will likely sign a deal before the end of the year.

Though the Shanghai market is young and relatively untested, Tokyo anticipates the Chinese equity market will see rapid growth.

The Osaka Stock Exchange may also be keen to broaden its horizons, after Nasdaq decided to scrapped its joint venture with the exchange (full story).

Shenzhen plans shelved

Nasdaq will pull out completely as of October 15 after the joint venture ran up losses of 5.3 billion yen ($45 million). It blamed poor "economic and market conditions."

Shanghai has emerged as the leading stock market in China, with the Shenzhen bourse relegated to a supporting role.

Chinese officials said around two years ago that they intended to encourage the Shenzhen market as a Nasdaq-like exchange for technology companies and startups.

Those plans have been shelved, given the poor state of tech stocks and world markets in general. Officials insist they are still under consideration.

The Shanghai exchange, only a little over a decade old, is around one-fifth of the Tokyo Stock Exchange's roughly 200 trillion yen market capitalization.

The majority of its listings are not open to overseas investors, with only a handful of "B share" companies not restricted to local buyers.