Alternative bourses gaining currency

Nasdaq is no longer the most preferred stock exchange for new companies.

Instead, smaller alternative stock exchanges in Europe and Asia Pacific are grabbing a higher share of new listings, according to a study on global new markets done by accounting and corporate advisory firm Grand Thornton.

The study on global new markets, defined as those attracting younger and high growth companies, reveals that the number of companies that got listed on the Nasdaq has declined from 3,765 in 2002 to 3,229 in the 2004, while the number of companies that got listed in new markets like the AIM (United Kingdom), Sesdaq (Singapore), Kosdaq (Korea) and the GEM (Hong Kong) have all seen a rapid increase in the past three years.

AIM led the pack with an increase from 670 to 875, Sesdaq saw listings increase from 113 to 148 and GEM from 142 to 198 in the same period.

"Globally, new markets have succeeded in attracting new companies and in growing investor appeal beyond national borders," said Vishesh Chandiok, partner and director, international business at Grand Thornton India.

Newer, smaller stock exchanges have begun attracting companies that look for an overseas presence and foreign investors. The companies seeking listing on these bourses are also smaller and mainly belong to new-age sectors that are young and growing, according to Thornton.

The reason for shift is that these exchanges typically have less stringent admission norms. Besides, smaller companies may face less visibility in bigger markets, have less access to investors and subsequently end up with less liquidity.

Whereas a new market gives them easy access to investors, improve visibility and liquidity thereby helping them achieve a higher valuations.

Interestingly, most exchanges that have grabbed the maximum share in new listing have no minimum requirement of initial equity or profitability.

"The high cost of compliance in bigger exchanges, especially in North America, is also driving the change," added Chandiok.

Not only have these new markets garnered interest in terms of listing but have also given superior returns to investors. The market capitalisation of several such new markets have registered impressive increase in the past one year.

Mothers Market (Japan) was the highest gainer with an increase of 278 per cent to $ 27.2 billion in the year 2004.

Next in line was AIM with 111 per cent to $44.9 billion and following it was Sesdaq with an increase of 35 per cent to $3.5 billion. New markets also witnessed the average market per company going up as larger companies got listed on them.

Here again, Mothers Market led the rest with a 126 per cent increase to $285 million, followed by AIM at 70 per cent to $51 million and Ofex (United Kingdom) with 31 per cent increase to $17 million.

Indian companies too are vying a share in this pie and looking at overseas listing on these new markets. "Mid-sized companies from sectors like resources (mining for instance) and technology are increasingly looking at such listings," added Chandiok.