With the index down 73% since its peak in March 2000, chief executives of Asian companies are no longer keen to list on the Nasdaq and many are actually removing their firms from it
Four years ago, if you asked any Asian chief executive if he or she had a wish, it was probably to be listed on the red-hot Nasdaq stock market.
Asians watched the Nasdaq Composite Index and Dow Jones Industrial Average roar higher and create unthinkable wealth while their own equity markets walked in place. With banks still doing the bulk of corporate lending, envious executives dreamed of listing in New York and riding the US boom.
That was then, of course. The Nasdaq is down 73% from its 10 March 2000 peak and last year's accounting scandals in the US still spook foreign investors. How much cachet the Nasdaq name has lost was apparent when Ito-Yokado, Japan's largest supermarket chain, said it would remove its listing on the Nasdaq.
'Historically, a Nasdaq listing had some prestige, but not since March 2000,' says Robin Cosgrove, who helps manage $100m in Asian equities at Lotus Asset Management.
Nasdaq's name is mud outside Japan, too. Korea Thrunet, South Korea's third-largest high-speed internet service provider, recently delisted its American depositary receipts from the Nasdaq. Singapore's Creative Technology, the world's leading maker of sound cards for computers, is also removing its shares from Nasdaq.
The symbolism of all this should not be missed. For Asian executives, a Nasdaq listing used to mean you had made it. You were a player in the biggest, most respected equity arena, winning the attention of investors and journalists everywhere. You could raise money in the most important economy and never look back.
That is why 38 East Asian companies have Nasdaq listings. Among the region's other listees are 10 in Australia, three in India and one in Papua New Guinea. Yet trouble in the US economy and a slowdown in stock trading volume has reduced the incentives to list on the Nasdaq.
The chill that pervades the US economy has diminished opportunities for Asian companies to raise money there. Asian executives also see scrapping the Nasdaq as a way to cut costs on annual listing fees. That is why Asian executives are focusing more on issuing debt than equities these days. The question is, how many more Asians will walk away from the Nasdaq?
The Nasdaq's reversal of fortune can be seen in how Asian markets trade. A few years ago, traders in Asia would come to work, see what the Nasdaq did overnight and follow suit. Economists and journalists would hazard guesses on Asian growth and business sentiment based on the Nasdaq's ups and downs. Not now. Market participants are back to looking to the Standard & Poor's 500 Index for direction.
It is also a reminder that Asia is on its own. In years past, economies relied on demand from giant, industrialised economies like the US. The region's export-your-way-to-prosperity model made more sense in a world of reliable economic locomotives. Now that the world's biggest economy is walking in pace, Asians need to look elsewhere for growth.
This is not the fault of economies like the US or those in Europe. It is not their problem East Asia fell into the trap of export dependence and has been slow to find its own path out. The region's attempts to find a different model since the 1997 Asian financial crisis have had mixed results.
Still, there is a rich irony here. Last August, Nasdaq called it quits in Asia. It pulled out of its Nasdaq Japan joint venture and called an end to its expansion elsewhere in Asia. 'If there is a culprit,' Nasdaq International said at the time, 'it was due overwhelmingly to economic and market conditions. There is not a viable economic venture going forward'.
Funny how things have come full circle. Eight months ago, Nasdaq pulled the plug on Asia, citing lousy business conditions. Now, some Asians are doing the same to Nasdaq, figuring the US economy may already have fallen into a Japan-like funk. It is proof, if it were needed, that what goes around in financial markets comes around.
Five years ago it was financial turmoil in Asia that scared the West; now it is stagnation in the biggest economies spooking Asia. Analysts here tiptoe up to questions like: What if the US dollar crashes? Could the US become Japan? Might the US housing bubble explode? Are more Enrons, Global Crossings and WorldComs lurking in the shadows?
Nasdaq's reversal of fortune mirrors that of the US economy. Asians are increasingly realising the economy that often serves as an 'oasis of prosperity' during rocky times is not up to the job. The failure of US stocks to rally now that war in Iraq may be wrapping up underlines the point that the US has deeper problems than uncertainty.
Unfortunately for Asia, that means the region also has serious problems. As if the effects of severe acute respiratory syndrome were not bad enough, Asia faces a continuation of sluggish US growth and asset markets. That could lead to deeper weakness in the West, too.
Bloomberg newsroom, Tokyo
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