perth exchange on way??

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    Second exchange on table


    Some of Perth's leading businessmen have thrown their support behind the possibility of a new WA-based stock exchange.

    More than 10 years after the closure of the controversial Perth Second Board, they said the time might be right for an alternative to the Australian Stock Exchange, specifically targeting small and medium-size companies.

    They said any alternative exchange with less stringent listing criteria would also have a big focus on the resources sector, reflecting the strong investor support for mining and oil and gas in WA.

    Some market players, dealmakers and company bosses said lessons could be learnt from the problems of the Perth Second Board and also the rampaging success of new secondary markets such as London's Alternative Investment Market (AIM).

    Veteran Hartleys stockbroker John Featherby said an alternative market was likely to get strong support in WA, especially from companies which might view the current criteria required to list on the stock exchange as too onerous.

    "Anything that adds to the development of a strong capital market for small-cap resources companies - akin to the developments that have ocurred elsewhere in the world such as AIM, New York's Nasdaq for technology companies and the small-cap board in Toronto - I would be in support of," he said.

    "The Perth Second Board served a purpose and brought to the market a host of listings that otherwise would not have had that chance."

    Former stockbroker and now company promoter Tony Barton said the stock exchange appeared to be too focused on Eastern States and the top 200 companies. "I think there has been a crying need (for an alternative market)," he said.

    "The first second board had all sorts of problems, but you can say that the country and the regulator have learnt from the past. That does not mean it shouldn't happen, it just means it should be controlled a bit better and have some serious protection mechanisms around it.

    "I think it does serve a purpose in getting some people to the market. If you have all the right protection methods around it, it is a good stepping stone towards a bigger company and bigger stock exchange listing."

    But support for a new exchange was not universal.

    Perth corporate adviser John Poynton, head of niche merchant bank Azure Capital, said while the idea might carry some appeal, it was also full of potential pitfalls.

    "People need to be very careful about taking things to the market too early, because while in this healthy environment you can get someone to put money into a new listing, the moment there is bad news you find a plethora of companies that have trouble securing funding going forward."

    Mr Poynton said there had been few success stories from the Perth Second Board but plenty of "train smashes". "Had they been funded differently the story might have ended differently," he said.

    Hugh Warner, a director of venture capital group Ascent Capital, which has been involved in numerous corporate restructurings and back-door listings, said the current single exchange system worked well.

    "One reason they got rid of the second board is it had second-rate companies," he said. "Even if a second exchange did turn up, our primary focus would still be ASX main board."

    The Perth Second Board was established in 1984 under the Burke Labor government as a means of giving small companies a mechanism to trade and access to capital markets. The idea was later taken up by the other State capitals.

    But the lack of regulation and scrutiny meant the system was open to exploitation, and after a series of failures and rorts it folded in 1992.

    The only alternatives to the ASX are the smaller Newcastle and Bendigo stock exchanges. The two exchanges, which have announced merger plans, have combined listings of 54 companies.

    In recent years dozens of Australian companies have opted to list on the highly successful AIM market, which has seen 1300 companies list and more than $25 billion raised in the 10 years since it was created.

    The ASX, which is due to post its first half profit result tomorrow, refused to comment on the issue of another exchange.

    © 2005 West Australian Newspapers Limited
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