An Overview of the Asian Over-the-Counter Markets

Abstract

In the 1990's, Nasdaq experienced tremendous growth and established itself as a leading securities exchange. From 1990 to 2000, Nasdaq quadrupled in market capitalization from$321 billion in 1990 to $3.6 trillion in 2000. The Nasdaq Composite Index is up 91% since 1996, out performing the New York Stock Exchange. Currently 57% of the public companies on the three major U.S. exchanges are listed on Nasdaq (Market Performance and Highlights, 2001). Small and medium and sized enterprises (SME) benefited from Nasdaq's multi-dealer market structure and placed the market in an advantageous position for their listings. In the 1990's, Nasdaq played an integral role in the increased focus on technology in the United States. Asia, hoping to mirror the United States' success, has created similar over-the-counter (OTC) markets. Over the last decade, Asian countries have created Nasdaq-modeled OTC markets with the intention of increasing investment opportunities and access to capital. This study focuses on Nasdaq modeled over-the-counter markets in Asia. Compared to Nasdaq, which opened in 1971, the Asian OTC markets are relatively young. With the exception of Singapore, which opened in 1987, the Asian OTC markets were created between 1994-1999. Because these markets are a new development in financial markets, they are virtually unknown. The objective of this study is to present descriptive data and analysis to enhance the overall understanding of the Asian OTC markets. The study offers a comparative survey of the current market environment, and provides an overview by focusing on market summary statistics, performance and correlation. The study includes (1) Hong Kong's Growth Enterprise Market (GEM), (2) Japan's Jasdaq, (3) Korea's Kosdaq, (4) Malaysia's Mesdaq, (5) Singapore's Sesdaq, and (6) Taiwan's GreTai Securities Market (GTSM). The markets are studied from two viewpoints, compared to the benchmark Nasdaq and compared to the country's main board. The study consists of a (1) literature review, (2) background on the OTC markets, (3) data collection methods, and (4) summary statistics, market performance, and correlation and benefits of diversification.