NASDAQ, The Neuer Markt and Japan: Asia's Venture Markets

No.103
May 2001
Research Fellow Hisashi Kajiyama

1. Since 1999, Japan has witnessed the birth and growing competition of three consecutive markets designed for new enterprises. However, low liquidity and a mountain of problems exist in all three markets. At the same time, the high tech-oriented Neuer Markt, established in Germany in 1997, is characterized by high liquidity and has already surpassed 300 listed companies, behind only the American NASDAQ in growth.
2. In Japan, due to the belief that "a venture market equals a market with low entry requirements", market directors across the board are racing to acquire businesses that plan to go public. As a result, it becomes impossible to consider the investors' interests. In fact, in any of the three markets, methods encouraging open disclosure are nonexistent and there is effectively no screening required to be listed. Consequently, it can only be said that the quality of these markets is considerably poor.
3. In contrast to this, German and American markets create an environment in which ease of decision-making for investors is given priority by lowering market standards and thereby raising risk. Put differently, these markets demand sufficient disclosure. This is only natural in venture markets where "high risk/high return" is the preeminent characteristic.
4. Additionally, we must also consider that German stock culture is still in its infancy. Even after a company becomes listed, the securities firm that underwrote it is obligated to abide by various measures such as IR support in order to raise the quality of the market.
5. If we refer to Germany's still-undeveloped stock market, the potential for reform in countries like Japan seems fully plausible.
6. Aside from Japan, other Asian countries with the potential for venture markets include South Korea and China. Of those two, South Korea's KOSDAQ has already been established, though its market concept resembles Japan's and likewise has no shortage of problems. On the other hand, China's version of the venture market-the "Business Initiation Board" (創業板/Chuàngyè Băn)-is predicted to get on its feet shortly, and is already aiming for a reputation as a "high quality market".

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