Staff of Reuters Read for 2 minutes (Adds detail, background) (Reuters) – TOKYO, July 9 (Reuters) – On Friday, the Tokyo Stock Exchange announced that around 30% of the equities listed on its main sector do not match new standards that will take effect in April on the rebranded “primary market.” The TSE is contemplating the most significant reorganization of Japan’s stock markets in years, with stricter listing standards to encourage corporations to improve their governance and profits. Companies that fail can submit reform plans by December to stay on Japan’s first section, which is being dubbed “primary market,” for an indefinite transition period before the TSE makes a final decision in January. “Because of the changeover time, many businesses will be able to stay. However, because the primary market has greater disclosure criteria, which means more costs, sticking to it may have more negative consequences for some businesses “NLI Research Institute’s chief equity strategist, Shingo Ide, stated. Companies in the “primary market” must have a free-floating market capitalization of more than 10 billion yen ($90 million) and a free float of at least 35 percent, according to the new rule. They’ll also need to implement a stricter governance policy in areas like transparency and board diversity. The companies were not named by the TSE, but analysts believe they are primarily “small caps” with little liquidity that account for less than 10% of the entire market capitalization. By 2025, shares with a trading market capitalization of less than 10 billion yen will be excluded from the TSE’s Topix index, which comprises all of the almost 2,200 businesses listed on the main board. (Hideyuki Sano and Makiko Yamazaki contributed reporting; Ritsuko Ando and Alexander Smith edited the piece.)/n
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