Exchange Shopping

European stock exchanges may be aggressively marketing to foreign corporates. But U.S. companies need a good business reason to list overseas.

European laws also let many high-demand foreign shares trade without any action on the company’s part; in some cases, the company may not even be notified of the move. London’s market trades shares of 140 U.S. blue chips, for example, many of which have never listed.

Exchanges, of course, point out that such efforts aren’t enough for most smaller companies. “If they really want to attack the retail market, they do need to fully list,” says Crosswell. For many companies, the ideal is a global exchange that allows them to list once and solicit funds from investors around the world.

When that will become a reality, however, is anyone’s guess. Nasdaq is striving to be the first global exchange within three years, and offer seamless electronic trading in local currencies–an initiative that might be difficult to complete given its revenue difficulties. The other promising initiative–a 10-country Global Equity Market project that includes the NYSE–is still sputtering after two years in existence.

In the meantime, U.S. companies will just have to globe trot–at least until a sustained market rally materializes.

Alix Nyberg is a staff writer at CFO.

Trading Places

Where U.S. companies are listing globally.

Exchange
Mkt. Cap (in U.S. $Trillion)*

U.S. Cos. Listed**

Deutsche Boerse (Frankfurt)
1.08
NA
Euronext Y’
1.84
60
London Stock Exchange (LSE)
2.03
61
Tokyo Stock Exchange
2.50
13

Y’ Includes Amsterdam, Brussels, Lisbon, Paris, & Warsaw
*As of 6/30/02
**Numbers are approximate, as of 8/02

Sources: World Federation of Exchanges, the exchanges

Worlds Apart

In Asia, regional stock exchange consolidation is occurring much more slowly than in Europe. Although the East Asian and Oceania Stock Exchange Federation has been aiming to establish a regional stock exchange in Asia since 1990, the group has so far remained a loose affiliation of individual exchanges. “Asian countries are not as well regionally integrated as Europe, and the establishment of a regional stock exchange is some way off,” says Vince Hooper, a professor of finance at the University of New South Wales in Sydney. And while markets in China, Hong Kong, and Singapore have boomed with domestic listings, they’ve largely been closed to outsiders, thanks to government regulations, making consolidation far more difficult, says Maureen O’Hara, a finance professor at Cornell University and president of the American Finance Association.

There are some hopeful signs in the wider Asia-Pacific region, however, including an agreement between the Singaporean and Australian exchanges to allow the shares to cross-trade, which took effect last December. Exchanges in Australia, the Philippines, Hong Kong, and Tokyo have all taken first steps toward merging with others in recent years by demutualizing, or going public. But none so far has formed major alliances. In fact, a planned merger between the Australian and New Zealand exchanges fell apart early last year.

Macroeconomic problems combined with market illiquidity have further disillusioned U.S. companies. Philip Morris Cos., for example, pulled its shares from the Tokyo Stock Exchange in May on the grounds that the $150,000 annual listing fee wasn’t worth the few trades investors executed there. It’s apparently not alone–fewer than 15 U.S. firms remain on the exchange, which has lost more than 50 U.S. listings since 1991. –A.N.

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