TSE/Appier: retail investors may spark a tech renaissance

Tokyo’s pitch to become an alternative Asian financial hub to Hong Kong has been lacklustre so far. Beijing’s clampdown and the protests that inspired it have destabilised Hong Kong’s business environment. But Japanese efforts to lure foreign listings and investors have yielded few results. A SoftBank-backed Taiwanese start-up has shown potential for Tokyo to do better — thanks to local retail investors.

The latest foreign addition to the Tokyo Stock Exchange (TSE) is ecommerce analytics start-up Appier. It has gained almost 20 per cent since it started trading last month on the TSE’s Nasdaq-style Mothers market, which focuses on start-ups.

Until now the record of foreign start-ups listed in Japan has been underwhelming. The Mothers own launch was poorly timed at the peak of the 1990s tech boom. Share price moves of Hong Kong-based financial services firm Beat Holdings illustrate weak appetite from local investors, who often regard foreign stocks as more risky. Beat is down 99 per cent from its first year of trading in 2004.

Yet the rise in retail investors could be on the verge of changing this trend. They now account for more than a fifth of the local equities market, compared with 16 per cent pre-pandemic. They are particularly active in the Mothers index. The index rose more than 100 per cent in the past year — one of the biggest gains in Asia. This means Mothers trades at a heady 6.6 price-to-book value, even higher than Nasdaq. Gains in Appier shares suggest there is plenty of demand left.

Young retail investors in Japan appear more comfortable taking on risk than institutional investors. Especially so if that risk is attached to a foreign start-up backed by a well-known local investor such as SoftBank.

Average first day gains for new listings in Japan exceeded 100 per cent last year, as retail investor demand surged. SoftBank-backed start-ups have the added advantage of easy access to local bankers. For lossmaking start-ups the low bar to listing on the Mothers, which does not require candidates to be making a profit, should help them to secure funding too.