NYSE Euronext Sees Small-Cap Market As Focus For China - CEO
May 19 2009 - 4:29PM
Dow Jones News
NYSE Euronext (NYX) is backing efforts to launch a new equities
market for small and medium-sized businesses in China as part of
wider efforts to tap the potential of the country's capital
markets.
Duncan Niederauer, chief executive, said in an interview that
the proposed Growth Enterprise Market, or GEM, at the Shenzhen
Stock Exchange is likely to be the top priority for Chinese
regulators addressing a raft of capital markets reform.
The exchange operator is contributing technical expertise
gleaned from its own small cap-focused NYSE Alternext US market to
the initiative as China addresses tight credit conditions for
smaller enterprises.
"They recognize that for a lot of the smaller companies, while
there's some credit available, given their limited access to
capital, the equity market gives them a pretty good opportunity,"
Niederauer said, fresh from his fifth visit to China since becoming
CEO.
The GEM is one of the first concrete results from a raft of
alliances signed by NYSE Euronext and other exchange operators with
Chinese partners.
Niederauer acknowledged that proposed ventures have had a mixed
record in generating real business, but said China is moving
forward with long-gestating plans to open up its financial
markets.
NYSE Euronext is also exploring collaboration to develop base
metals index futures and other products with the Shanghai Futures
Exchange, the smallest of the country's three commodities
platforms.
Partnerships with the Dalian and Zhengzhou commodity exchanges
have yet to bear fruit, highlighting questions about the worth of
memorandums of understanding between international exchange
operators and their Chinese counterparts.
Rival exchange operators Nasdaq OMX Group Inc. (NDAQ), CME Group
Inc. (CME) and Deutsche Boerse AG (DB1.XE) are also seeking inroads
to China via partnerships with local exchanges, but going has been
slow as Chinese authorities decide just how much foreign
involvement they'll allow.
"Exchanges over the years have signed lots of MOUs with lots of
[Chinese] exchanges, and in most cases they haven't led to much
more than good conversations," Niederauer said. "It's hard to point
to tangible results."
NYSE Euronext continues to pursue a listing on the Shanghai
Stock Exchange, where it hopes to be the first U.S. company listed
on a planned international board, but Niederauer said early 2010 is
now a more likely timetable than the previous target of late
2009.
Chinese financial regulators are considering a multitude of
potential reforms, like launching the GEM market, opening markets
to more institutional and international investors, inviting
international companies to list in Shanghai, and moving forward
with regulated derivatives.
During his visit, Niederauer advised Chinese officials that
while the country's regulators might be tempted to use the crisis
as a reason not to move forward with long-awaited financial
reforms, China should take advantage of its relative strength in
the current environment.
"They're somewhat comforted by the way the world's markets are
behaving," Niederauer said. "China and the U.S. are among the
countries they think will be out of this downturn quicker than
most, but they're still being very conservative. They realize, as
we do, that their capital markets are still fairly young."
-By Jacob Bunge, Dow Jones Newswires; 312-750-4117;
jacob.bunge@dowjones.com