Asian bourses are competing to reform their markets, working to improve access and the quality of listings, as authorities race to lure foreign capital and enhance protections for retail investors.
While global money is still drawn to US shares, especially tech stocks, uncertainties arising from US President Donald Trump’s erratic trade policy and other moves have encouraged a growing number of institutional investors to seek places to deploy their capital.
Asian authorities hope to grab a slice of the pie by putting market reforms in place. These range from Thailand making more securities eligible for short selling to India easing documentation and compliance requirements for qualified investors.
Japan led the way, with a decade-long effort to improve corporate governance and strengthen shareholder rights—reforms which are beginning to bear fruit.
“Japan stands out in terms of how big its market reforms are, while ASEAN countries have begun to roll out smaller measures,” said Yohei Kitano, a senior analyst at the Nomura Institute of Capital Markets Research in Singapore. “Countries hope to create a thriving stock market that can become globally important.”
In Japan, the benchmark Nikkei Stock Average has soared to historic highs, in part driven by the Tokyo Stock Exchange’s push to accelerate corporate governance reforms and raise capital efficiency among listed companies. That has helped whet foreign investors’ appetite for Japanese equities.
“One of the most exciting things we’ve seen recently is when the TSE turned to corporate Japan and said that price-to-book ratio and return-on-equity are low, which is embarrassing,” said Alexander Treves, head of investment specialists for APAC equities at JP Morgan Asset Management.
“One noticeable point is that homegrown reforms are important because they stick better,” said Treves, in contrast with foreign asset owners or activists coming in and making demands. “If we think about some of the markets around the region, what’s happening in South Korea and Singapore, those are also homegrown,” he said.
Singapore plans to inject SGD 5 billion (USD 3.8 billion) into its stock market as it looks to bring in outside capital and broaden investor interest beyond large-cap stocks. South Korea, which has long had an undervalued equity market, has moved to strengthen shareholder rights. Earlier this year, it also launched its first alternative stock trading system, offering longer trading hours and lower fees in an attempt to keep investors engaged.
Smaller exchanges in Southeast Asia are rushing to catch up. Vietnam aims to roll out its “central clearing partner” (CCP) mechanism by 2027, which eliminates a fully prefunded trading requirement that has been a barrier for foreign investors. It has also pledged greater transparency and equal access to information for foreign investors.
Earlier this month, Vietnam secured an upgrade from index provider FTSE Russell. Following an interim review, it is poised to graduate from “frontier” to “secondary emerging market” status, starting in September 2026, which will increase its exposure to global investors. Vietnam hopes strengthening the country’s equities market will make it a larger source of medium- to long-term capital, thereby boosting economic growth.
For many emerging markets, lack of liquidity and weak regulatory frameworks remain challenges. Political upheaval and corruption are also risks that put off global investors.
A case in point is Thailand’s SET index, which hit a five-year low in June amid political turbulence and a border clash with Cambodia. In the Philippines, concerns over alleged government corruption have led to protests, sending the PSE Composite Index sliding. Both indexes are down around 8% so far this year.
In an effort to prop up the market, Thailand has adjusted short selling rules to enhance transparency for investors, making more securities eligible for short selling. The change has halted the decline in the SET, according to experts. “After the exchange announced [the new] short selling measures, the index started to rebound,” said an analyst at Asia Plus Securities.
Short selling regulations have progressed in other parts of the region, albeit slowly. In March, South Korea lifted a ban on short selling that had lasted five years, while the Philippines has allowed short selling since 2023. Vietnam, which allows short selling in the derivatives market, is considering expanding that permission to shares. Indonesia has postponed the implementation of equity short selling until March 2026.
Thailand is also readying new rules that will ease requirements for share buybacks, allowing companies to repurchase stock immediately when prices fall, instead of waiting six months.
In May, the Philippines passed the “Capital Markets Efficiency Promotion Act,” a law aimed at simplifying the country’s capital markets by overhauling its taxation of passive income and investments. The stock transaction tax on listed shares has been cut from 0.6% to 0.1% of the gross sales price. This move alone is expected to significantly enhance the competitiveness of the Philippine Stock Exchange, bringing it more in line with regional benchmarks and making trading more attractive for both local and international investors.
Cristina Ulang, head of research at Manila-based First Metro Investment, said the new market initiatives were prompted by a need to align with competitors. “High friction cost lowers return,” Ulang said. The reforms “facilitated capital market product diversification and novelty,” she said, which increases market activity.
While institutional investors make up a large portion of the equity market holdings in the US and Europe, Asian bourses are dominated by corporations and the public sector. According to 2024 data by the OECD, institutional investors make up 47% of total equity holdings globally, while in Asia, the figure is 18%. Southeast Asian countries, in particular, highlight this difference: Institutional investors account for just 6% of shareholdings in the Philippines. In Vietnam, the figure is 7%, and in Thailand, it is 11%.
Hong Kong and India are two of the bigger markets in the region with higher participation by institutional investors. Large initial public offerings have also helped boost their markets.
Hong Kong’s IPO market is the largest in the world this year, led by flotations from battery giant Contemporary Amperex Technology (CATL) and miner Zijin Gold. Hong Kong’s dramatic recovery from a prolonged slump has been driven by a mix of secondary listings by Chinese companies pulling out of US markets, geopolitical uncertainty and strong investor appetite for China’s emerging technology companies.
In May, the Hong Kong Exchange launched the “Technology Enterprise Channel” (TECH), a scheme designed to facilitate new listings by specialist technology and biotech companies. It also offers a confidential filing option, where early-stage companies can mitigate risks arising from premature and prolonged disclosure of information on business strategies or proprietary technologies.
In September, India’s market regulator instituted a range of reforms across multiple asset markets as the country works to attract investment while also strengthening protections for retail investors.
The Securities and Exchange Board of India (SEBI), meanwhile, has simplified rules for sovereign-backed funds and overseas retail funds. Investors seen as low risk will now have to provide fewer documents and meet lower compliance requirements to participate in India’s equity and debt markets.
Such funds make up almost two-thirds of foreign investors in these markets, and the changes show that “the regulator is removing key hurdles and showing a clear intent to bring in long-term capital,” said Feroze Azeez, joint CEO of wealth manager Anand Rathi Wealth. But they “will not flip the switch overnight,” Azeez said. This point was underscored as foreign investors have withdrawn about USD 12 billion from the Indian stock market so far this year.
Despite booming IPO markets in certain countries, some Asian bourses are at risk of losing out to the world’s largest equity market. “Singapore and other Asian bourses, by implementing market reforms, hope to encourage startups, including unicorns, to pursue IPOs in their home countries rather than listing in the US,” said Nomura’s Kitano.
The US is still the dominant market for startups, especially for bigger companies. While there are more than 1,600 unicorn companies globally, the US is home to around half of these. China, with the next largest share, has just 17%, followed by India with 5%, according to data from Crunchbase.
“As an investor, choice is something you want from the equity market. The more you can choose from, typically, the happier you are as an active investor,” according to JP Morgan’s Treves.
However, bourses are likely to face a challenging balancing act between improving the quality of listings and increasing their quantity. Moves to encourage IPOs by loosening governance standards could spell trouble.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.