Nasdaq OMX opens up on China opening up

The US-Nordic group, which offers technology and services to Asia's companies and exchanges, is encouraged by what it sees in the region.

Nasdaq OMX might be a US-European exchanges group but on Tuesday it took time out to update reporters on how it sees Asia.

Although it operates no physical exchanges in the region, it offers services to those that do and to the companies listed on them.

And from what Nasdaq OMX is seeing, it is clear that it is not just banks, food groups and energy groups that are waiting with baited breath for China to give foreign companies better access.

“Everyone is preparing for when China opens up. No one knows when this is going to happen but everyone is doing it, inside and outside the country,” said Ulf Carlsson, Nasdaq OMX's head of North Asia & Japan.

The China A-share new issues market has spent the best part of the last 18 months kicking its heels, waiting for the regulator to redefine the requirements of initial public offerings to protect investors after the system got overheated.

Beijing along the way said it wanted to let market forces dictate the ebb and flow of shares rather than keep a firm grip on the reins. But investors and analysts were divided as to whether Beijing would stay true to its word and, as soon as it re-opened in January, the regulator tinkered some more.

How can an international exchange group, therefore, prepare itself for an event that might not happen, certainly not in the way people expect?

“Our role is as an advisor; sharing knowledge. We did a lot of advisory [work] years ago and didn’t get paid. Today we get paid. We don’t make money but we get paid,” Carlsson said.

He said Nasdaq OMX talks with its Chinese counterparts on best practise, market surveillance and post-trade issues among other things.

“They [Chinese exchanges] are reaching out and are interested to learn how things operate outside the country,” he said.

He agreed with the view that China was still reluctant to open up fully by allowing capital to flow freely in and out of the country because it is afraid there could be just outflows.

The next big bang for global exchanges

Even so, once it does happen it could be the next big bang for global exchanges, following the wave of mergers and acquisitions that led to the creation of Nasdaq OMX just over seven years ago, when the New York technology stock exchange snapped up its Nordic peer.

“The trend of China opening up is very encouraging. The day China allows inflows and outflows will make a huge difference to this market,” he said.

Nasdaq OMX has 700 customers in Asia. It primarily offers guidance, technology and “corporate solutions” to exchanges and companies.

It supplies technology to exchanges such as the Indonesia Stock Exchange, the Tokyo Commodity Exchange and the Stock Exchange of Thailand. 

The group said it has engaged with 70% of the companies on the Australian Securities Exchange, 40%-50% of the top-100 companies on the Hong Kong Stock Exchange, and 50% of the top-30 companies on the Singapore Exchange.

Nasdaq OMX this month opened an office in Manila to provide services and support to its global corporate solutions unit, particularly its investor relations business. In January, it also opened an office in Bangalore, which will focus on developing new technologies.

That said, it is looking for more.

“We are present in many frontier markets, such as in Africa and the Middle East, just not in Asia,” Carlsson said.

Judging by its earnings trends, it would appear Nasdaq OMX has room for manoeuvre. The group this month posted record fourth-quarter net profit, 23% higher than the same period the year before.

¬ Haymarket Media Limited. All rights reserved.

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