13 February 2001
LONDON STOCK EXCHANGE BUILDS ON
INTERNATIONAL BUSINESS WITH VISIT TO JAPAN
As part of its continuing strategy to build international business, the London Stock Exchange today began a two-week marketing visit to Japan. Representatives of the Exchange's Issuer Services and Institutions Group are re-emphasising London's pre-eminence as an international market to the Japanese financial community.
Tim Ward, Head of Issuer Services and Institutions at the Exchange commenced the visit with a speech at the "City of London in the 21st Century" promotional event today. In his speech he spoke about plans to enhance the Exchange's leading position within European equity markets and why this means that now, more than ever, London is the premier exchange for Japanese companies seeking a European listing. (The full text of Tim Ward's speech is attached).
The remainder of the Exchange's two-week itinerary will be occupied with visits to existing listed companies and potential issuers, as well as consultations with Japanese investment banks and institutional investors.
Notes to editors:
For more information please contact:
London Stock Exchange Press Office
John Wallace, Ian Campbell, Jamin Smith 020 7797 1222
Japanese media may wish to visit the International section of our website.
Speech at the "City of London in the 21st Century" Event
Tokyo, 13 February 2001
The London Stock Exchange - The International
Market for Japanese Companies
Head of Issuer Services & Institutions
London Stock Exchange
It is a great pleasure to be here and to have the opportunity to speak directly to leading representatives of the Japanese business community about some of the new developments at the London Stock Exchange and in European capital markets.
We are extremely grateful to the British Embassy for bringing us all together in this way. I would like to speak today about the benefits to Japanese companies of listing on the London Stock Exchange - the world's premier international exchange. I will then talk about our plans to enhance our leading position among European equity markets, and why this means that more than ever London is the pre-eminent exchange for Japanese companies wishing to list in Europe.
I would like to begin by emphasising the importance we attach to our relations with Japan - the world's second largest economy.
London starts from a strong base in this regard. Not only are we the world's largest centre for the trading of international equities but we are already the largest financial centre for the trading of Japanese equity outside Japan.
And the London Stock Exchange currently has 29 Japanese companies listed on its international market - with a combined market capitalisation of nearly 500 billion. Within the last eighteen months, we have been proud to welcome to our market Toyota Motor Corporation, Ko-na-mi, Ta-ke-fu-ji Corporation, and most recently Ma-ru-wa.
And whilst growing in both value and volume terms, Japanese business now accounts for 10% of the London Stock Exchange's total international business.
This seminar comes at a particularly interesting time - within the wider context of some of the rapid changes that are currently affecting all the world's stock exchanges.
Continuing developments in technology and communications are erasing the natural boundaries of time and space and increasingly making the world into a global marketplace - and in addition to the erosion of predominantly natural barriers, other barriers continue to be lowered as markets are deregulated and liberalised.
Today, these forces of technological change, liberalisation and globalisation combine to enable ever-larger sums of money to move across borders. As more countries have access to, and the need for, international finance - cross-border flows of institutional investment funds have increased dramatically - up five-fold in the last decade alone.
At the London Stock Exchange, we are aware of the need to respond positively to these trends in order to ensure that we offer the best possible services not only to domestic, but also to international issuers and investors.
A successful modern exchange is essentially the correct blend of technological excellence and balanced regulation - combined, of course, with the professionalism of its members. At the London Stock Exchange, we not only invest heavily in information technology but also keep our regulatory activities under constant review so that our markets are not burdened unnecessarily, while ensuring that the regulatory framework is sufficiently robust to offer the protection to investors that they rightly demand. Our objective is always to build confidence - essential for cross-border business - in the integrity and fairness of London as a financial centre, while at the same time ensuring that we keep abreast of developments in the world economy and in global markets.
A particular aspect of that regulatory framework is the way we handle price sensitive information through our company news dissemination service, which we call the Regulatory News Service. It currently handles around 700 announcements per day and is transmitted real-time to over 150,000 screens around the world. By managing the disclosure of information that may affect the market, we ensure greater fairness and transparency. This gives the investor based in Tokyo access to exactly the same information at the same time as the investor in London. There are no advantages to the local investor - or to put it another way there is no disadvantage to the remote investor.
In order to meet the needs of different market segments, the London Stock Exchange provides a comprehensive range of products and services - for domestic and international equities and for bonds and fixed interest instruments. The strength of the UK's domestic market underpins our international business. The capitalisation of our domestic equity market now stands at around $2,000 billion and it is interesting to note that its value is now 200% of UK GDP, a higher percentage even than the United States and far higher than any other European country. This is a significant demonstration of the strength and maturity of our equity culture.
This equity culture has developed from the situation in which the surplus capital of the Industrial Revolution was invested - first in bonds and gilts in the early 19th century, and later into equities. Much of this surplus capital was invested abroad, making London into one of the world's largest, most sophisticated and most accessible international centres for financial services. As a result, over this long period, a wide diversity of related skills has been developed covering commercial banking, investment banking, insurance, corporate finance, research, securities distribution and trading and asset management - all supported by the expertise of the legal and accountancy professions. This is the intellectual capital that has been nurtured and grown in the City of London.
This critical mass of experience ensures that London is well-placed to take advantage of major new investment opportunities, such as those arising from the privatisation of state-owned enterprises -a policy that was begun in Britain. As privatisation has spread around the world, so has the demand for London's acknowledged expertise. It is an interesting fact that almost a quarter of the value of the top 100 UK companies is now represented by companies that are themselves the products of privatisations!
We believe this provides an environment that will attract overseas companies to list in London. In addition to the skills of the City of London, the principal reason that these companies choose to list on the London Stock Exchange is the access to that deep pool of international capital that is available through our markets. Significantly, London is now the largest centre in the world in terms of funds under management, with almost $2,500 billion of investment capital being managed, more than any other city in the world.
It is encouraging that to date, that over 500 companies from over 60 different countries have chosen to list on our market - and in addition, we saw a new record turnover in international equities in 2000 of 3,400 billion, over 40% better than 1999.
Although these figures are impressive, we do not for a moment rely solely on our record. Success in the past is no guarantee of success in the future and we are more than ever aware of the competitive forces unleashed by the increasing globalisation of the world economy.
At the London Stock Exchange, we are playing our part to maintain the competitiveness of the City of London in order to ensure that companies from Japan and from other parts of the world continue to benefit from listing and trading on our markets. We constantly monitor global developments, and seek to provide the markets and products to respond to the changing circumstances.
The recent changeover to the euro was a major step for all the Member States of the European Union. While the United Kingdom is not among the first wave of entrants, the City of London is participating strongly.
We have taken a number of initiatives to ensure that the London Stock Exchange will continue to be the gateway to Europe for international issuers and investors.
Thanks to the flexibility of our trading platform, the Exchange has for a number of years been able to offer trading in all of the world's major currencies. So London's capability to trade in the euro was already well-established, and it raised no special technical or regulatory issues. This is underlined by the fact that approximately 40% by value of total trading on our markets occurs in euros, more than any other currency.
In addition, we made have provisions last year for companies to list shares, depository receipts and bonds in euro.
These euro-denominated instruments provide a greater choice for international issuers and give them increased flexibility to raise capital through a London listing - enabling international companies to tap into what is now the most important currency bloc after the US dollar - and allowing investors to hold euro instruments as part of their portfolio, alongside holdings denominated in other currencies.
We have also recently announced a number of measures that will further enhance the services we offer our customers along with strengthening our already strong position.
Foremost among these is the development of a new central counterparty, that will go live on 26 February. The central counterparty acts as an intermediary to each trade - a buyer to every seller and a seller to every buyer, greatly streamlining the trading process. This offers considerable benefits to the users of our markets through the introduction of post trade anonymity and enhanced risk management, and we believe represents a significant step in the evolution of Europe's market infrastructure. In addition we have recently reduced standard settlement times for the trading of UK equities from five to three days - a process that also assists in risk reduction, bringing benefits to all market users.
You may be aware that we have recently announced the appointment of our new chief executive, Clara Furse. Clara started in the position on the 5 February, and we look forward to the contribution she will make to the Exchange. She brings to the appointment a global outlook, together with considerable business and IT experience. In particular, her knowledge of European and global operations will be of immense value to the Exchange as we widen and strengthen the scope of our European business and meet the demands of market users in an increasingly competitive and globalised business environment.
Now while we work to build our core business, there remains a widespread assumption that rationalisation across the European, indeed global, securities industry is necessary.
This assumption is driven primarily by two considerations. The first of these is that investors are increasingly looking outside their national boundaries for investment opportunities, and indeed as issuers increasingly look to access international pools of capital, there are increasing calls for an exchange particularly in Europe to be able to facilitate investment by industry sector and to service the broad set of needs for accessing the European Capital Market, rather than narrow needs for accessing domestic markets.
The second issue is cost. In a world where the pace of technology is growing and the focus on the bottom line is as clear as ever, there is a general belief that the cost of supporting different Exchanges, with different technology basis, rules and settlement systems across Europe is much too high.
The result of these two drivers is a widespread expectation that there needs to be rationalisation in some form.
We are determined to break through the barriers which impede a genuine European single market in cross-border capital-raising. We will be working hard to ensure that we make further progress towards a single European passport for issuers, to ensure that companies who list in London are able to access capital across the whole of Europe. Our aim is to make cross border capital raising as easy as domestic capital raising.
We have also begun to broaden the appeal of our markets across Europe with a view to building a borderless European IPO market around techMARK - our market for innovative technology companies. Over the next few months we will be making a major investment in marketing techMARK to attract new companies and investors.
We are seeking to play a leading role in the development of capital markets in Europe because only by doing so will our market users benefit fully from the opportunities in the future. By extending the reach of AIM and techMARK across Europe we will be building on our position as Europe's leading equity market and the worlds leading international stock exchange.
The United Kingdom's trading links with Japan have a long history and we at the London Stock Exchange are keen to see them continue and prosper. I am very grateful to have had the opportunity to talk to you today about the particular strengths of the London Stock Exchange and the City of London.
Our plans for Europe are just part of the programme upon which we have embarked to ensure that our market users are able to benefit fully from the unprecedented opportunities that now prevail in world securities markets.
I have covered today how London is the leading centre for the trading of Japanese equities outside of Japan, and how that figure has increased dramatically in recent years. It is our belief that the strength of our existing markets - as the worlds leading international stock exchange and Europe's leading equity market offers considerable benefits for Japanese companies seeking an international listing. This combined with our plans to enhance the services we offer, and to build a borderless market for European IPO's - makes London the premier exchange for Japanese firms seeking a European listing.
May I say again how grateful we are for today's arrangements and thank you most warmly for your hospitality. I look forward to hearing the contributions of the remaining speakers.
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