NYSE Expects More Foreign Stocks
Jan. 12, 1999
NEW YORK (AP) _ The head of the New York Stock Exchange expects a 25 percent increase in foreign companies listed on the exchange this year as more U.S. companies merge with global competitors and emerging countries privatize their industries.
To accommodate the increase, the NYSE plans to open a foreign trading room in June 2000 when the exchange moves to larger facilities across Wall Street, chairman Richard Grasso announced Tuesday.
For U.S. consumers, easier and wider access to foreign companies offers a chance to save money and reduce risks by investing directly in diverse companies around the world.
``It removes the need for an intermediary, such as a mutual fund, and lowers the cost of investing because you no longer need to rely on a broker in a distant exchange,'' said William Goetzmann, a finance professor at the Yale School of Management.
The foreign trading floor will be open far beyond the normal exchange hours of 9:30 a.m. to 4 p.m. EST, Grasso said. When the new trading room opens, investors will be able to buy and sell shares from 5 a.m. until 10 p.m. or midnight.
While looking ahead to greater foreign representation on the NYSE, Grasso recalled the ``moment when globalization came to U.S. markets,'' when DaimlerChrysler AG's new global shares began trading on his exchange on Nov. 17.
Although Daimler Chrysler is a German-based company, its shares trade in dollars on the NYSE like stock in any U.S. company. Traditionally, foreign companies issue American Depositary Receipts, which represent a certain number of the company's common shares held by a bank or clearing house.
``With DaimlerChrysler we saw, for the first time, a truly global equity,'' Grasso said at a conference sponsored by the Conference Board, a business research group.
While other foreign companies have been slow to embrace the new global shares, international mergers continue to make weekly headlines.
Vodafone Group PLC, Britain's largest cellular company, last week offered $55 billion for San Francisco-based AirTouch Communications Inc. Two weeks ago, British Petroleum PLC completed its merger with Amoco Corp. And Deutsche Bank is expected to complete its acquisition of Bankers Trust Corp. in the first half of the year.
Meanwhile, emerging countries like Brazil, China and Russia are selling off state-owned industries in record numbers. Brazil's telephone company, Telebras, for example, was split up in into a dozen publicly held companies late last year.
While the NYSE is still the largest stock market in the world, it no longer dominates capital markets. Twenty-five years ago, the companies traded on the NYSE accounted for 80 percent of the world's capitalization value, but today it controls just half. The NYSE faces fierce competition from exchanges in London, Germany and Hong Kong.
``This is a move to protect their competitive position,'' said Samuel Hayes, a finance professor at Harvard Business School. ``More of the companies they trade on their exchange are not on East Coast time, and their investors aren't.''