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Tokyo Exchange Head Saito Cuts IPO Outlook in Half

The Tokyo Stock Exchange
Traders work on the floor of the Tokyo Stock Exchange (TSE) in Tokyo. Photographer: Tomohiro Ohsumi/Bloomberg

Plunging stock prices caused by Europe’s debt crisis will slash the number of new listings on the Tokyo Stock Exchange to about 50 this year, half the number projected in December, the bourse’s president said.

Companies are canceling plans to raise capital through initial public offerings as the deficit concerns in Europe roil global stock markets, Atsushi Saito said in a Bloomberg television interview on May 19. Markets in Hong Kong and across Asia also have been hit by a spate of canceled IPOs, he said, without naming any companies.

Japan’s Nikkei 225 Stock Average has fallen 14 percent from this year’s peak on April 5 as credit-ratings downgrades of Greece, Portugal and Spain added to concern the European governments will struggle to fund budget deficits and derail the global economic recovery. The MSCI Asia Pacific Index has tumbled 13 percent from its high on April 15. Some analysts refer to a decline of 10 percent as a correction.

“I’m a little bit less optimistic thanks to the Greek problem,” said Saito, who in December predicted 100 new listings on his exchange this year. “The number of IPOs were just resuming on a very healthy line,” until the European debt crisis worsened.

“Even Hong Kong and Asian markets, which are very active IPO markets,” have faced a series of cancellations, he said.

New Listings

Eight Japanese companies raised a total of 1.05 trillion yen ($11.7 billion) through IPOs this year, according to data compiled by Bloomberg. This year is the biggest for Japanese IPOs since 2006, when 2.14 trillion yen was raised, the data show. Sales sank to 56 billion yen last year as the collapse of New York-based Lehman Brothers Holdings Inc. froze credit markets and the Topix index posted the worst performance of the world’s 20 biggest equity markets.

Dai-ichi Mutual Life Insurance Co., Japan’s second-largest life insurer, sold 1.01 trillion yen in shares in the world’s biggest IPO in two years on April 1.

Three more companies plan to start trading in Japan this year, according to Bloomberg data. Voltage Inc., a Japanese software company, plans to list its shares on June 11. Papyless Co., which distributes electronic books, is due to list on June 23 and Densan Co., an information-services provider, the following day.

Missed Estimates

Japanese stocks fell today, dragging the broader Topix index to its longest losing streak in six months, as Finance Minister Naoto Kan yesterday warned of persistent deflation minutes after the release of a government economic growth report that missed economist estimates. The Topix has lost 12 percent from its high on April 15.

Japan’s economy grew at an annualized rate of 4.9 percent in the three months to March, the Cabinet Office reported yesterday. That missed the median forecast of a 5.5 percent gain of 21 economists surveyed by Bloomberg News.

The Nikkei 225 had its steepest annual retreat on record in 2008 after Lehman’s failure. Concern is mounting that Europe’s debt crisis will provoke a new wave of selling, said Masayuki Kubota, a senior fund manager at Tokyo-based Daiwa SB Investments Ltd., which manages about $37 billion.

“People clearly remember the global financial crisis triggered by the collapse of Lehman and are afraid that an incident of similar magnitude will erupt,” Kubota said.

Swire Properties Ltd., the biggest commercial landlord in eastern Hong Kong island, shelved its plan to raise as much as HK$20.8 billion ($2.7 billion) in an IPO after considering “the deterioration in market conditions,” its parent Swire Pacific Ltd. said in a statement on May 6.

Hong Kong’s benchmark Hang Seng Index has slumped 11 percent this year.

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