Tokyo Stock Exchange may delay IPO

TOKYO (Reuters) - Tokyo Stock Exchange, the world's second largest, said it might delay its plans to list its shares on its own exchange for the second time, and also called on Japanese investors to be more demanding shareholders.

The exchange, which operates Japan's largest bourse, has said before it would list the shares by 2009 to boost its competitiveness in the global market.

Going public by 2009 "is a vague objective, not a firm one," Atsushi Saito, the TSE chief executive, told the Reuters Japan Investment Summit. "There is a possibility that the IPO will be delayed."

The exchange in June last year hired Daiwa Securities Group Inc (8601.T), Morgan Stanley (MS.N) and Nomura Holdings Inc (8604.T) to handle the initial public offering.

Although Saito did not elaborate on reasons for a possible delay, it comes as the stock market is suffering from big falls. The benchmark Nikkei 225 has dropped 13 percent since the beginning of this year. Singapore Exchange (SGXL.SI), which TSE has an alliance with, lost 50 percent of its value this year.

The Nikkei average fell 1.3 percent on Wednesday to hit its longest losing streak in more than 40 years on concern over slower growth in the global economy.

Japanese equity capital markets remain slow after the global stock market was hit by the credit crunch last year. Companies in Japan sold $778.5 million worth of shares in IPOs between January 1 and June 25 this year, according to Thomson Reuters, compared with $1.68 billion in the same period a year ago.

The exchange first delayed the IPO after system failures caused suspension of trading at the exchange for almost a full day in 2005. A former president Takuo Tsurushima resigned to take the blame.

The exchange in 2004 chose Daiwa, Nomura and Nikko Citigroup Ltd to arrange the IPO. It called another round of auditions last year after it had decided to push ahead with the IPO plan.

JAPANESE INVESTORS

Separately, Saito called on Japanese institutional investors to regulate companies they invest in more strictly.

"In Japan, professional investors are not mature. Many of them are not independent," Saito said. "While in the U.S. many of them are independent and strict to companies because if their performance is not good, it's them who are blamed by their clients."

But things are changing slowly.

"Maybe about 10 years ago, we always said yes, yes, yes to the resolutions of the shareholders' meeting," said Yuuki Sakurai, general manager of financial and investment planning at Fukoku Mutual Life Insurance Co.

"Now we are not saying 100 percent to all resolutions. We always have to be sure that we have a reason for saying yes."

Japanese companies' return on equity is lower than that in the UK and the United States even though Japan is a wealthy nation. Japan's ROE stands at 9 percent, while in the United States, companies generate about 18 percent returns, and 20 percent in the UK, Saito said.

"The stock market is not attractive if the companies generate low returns on equity," said Saito.

Saito, however, said the United States was not perfect in terms of corporate transparency as witnessed in cases such as Enron and Worldcom.

"Enron and Worldcom both had outside directors. Enron was known for having steady corporate governance but the company was in the largest scandal," Saito said.

Saito also criticized how the sale of Bear Stearns BSC_pf.N to JPMorgan Chase & Co (JPM.N) was done, saying the price of Bear Stearns was decided by regulators.

"There was no room for shareholders to say anything about the price," he said. "Can we say that shareholders were respected in this case?"

He also said the Japanese government did not fully explain in advance that there was a restriction on shareholdings in an electricity wholesaler Electric Power Development Co (9513.T), or J-Power.

The Japanese government blocked British activist fund The Children's Investment Fund (TCI) earlier this year an attempt to double its stake in J-Power, citing the need to ensure stable electricity supply for the restriction.

"They should have explained clearly... That was not so much acceptable."

(Additional reporting by Nathan Layne. Editing by Jean Yoon)