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Stocks

After Mercari, where are Japan's unicorns?

Japan, unlike US and China, lacks many IPO-ready startups

The Mercari app allows users to easily buy and sell products online.

TOKYO -- Flea market app operator Mercari's plan to go public is giving a breath of fresh air to Japan's stock market, but what could become the country's largest IPO for the year also highlights the lack of promising startups to follow in its steps.

Many blue chips languished Monday amid continuing political turmoil in both Japan and the U.S. But investor enthusiasm was palpable on Tokyo's Mothers market for startups. United, a mobile advertising company listed gained as much as 13% to a high of more than three and a half years. It closed the session down slightly at 3,055 yen following a rush to lock in profits, but still came second in trading value for the day across Japan's two startup-focused markets.

United has an interest in Mercari. "Market players, particularly individuals, bought the issue on association" on hopes that Mercari's planned IPO will boost United's valuation, said Nobuyuki Fujimoto, a market analyst at SBI Securities. GMO Internet, another Mercari investor, ended up about 3% at 1,423 yen.

Mercari is one of the few Japanese "unicorns" -- privately owned companies that could be valued at $1 billion or more when listing -- expected to go public in 2017. Its app has been downloaded more than 75 million times at home and abroad. 

The U.S. and China continue to produce a parade of new unicorns like ride-hailing giant Uber Technologies, cloud storage provider Dropbox and co-working platform UrWork. But Japan has few other startups that could potentially stage a major IPO. SG Holdings, the parent of logistics provider Sagawa Express, probably would be valued at around 300 billion yen ($2.7 billion) should it go public. But it is an established company more interested in stability than in growth.

Even listed Japanese startups are drawing more speculators than investors betting on their growth. Mothers-listed Remixpoint, which runs a virtual currency exchange, had seen its price increase ninefold since the end of April before plunging nearly 40%. Its price-earnings ratio is now at 441.

Interest in Japanese companies is low. "Even when I recommend Japanese issues, younger people especially ask about Apple or Facebook instead," said Okasan Securities Group President Hiroyuki Shinshiba.

Since the beginning of the year, retail investors have sold more than 2 trillion yen of Japanese stocks on a net basis. The lack of attractive options, like the FANG issues in the U.S. -- Facebook, Amazon, Netflix and Google parent Alphabet -- is keeping Japan's stock market from reaching new heights.

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