Tokyo exchange to remove nearly 500 firms from Topix index

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Stock Markets 51 minutes ago (Oct 07, 2022 03:45AM ET)

Tokyo exchange to remove nearly 500 firms from Topix index © Reuters. FILE PHOTO: A security official is seen next to a monitor showing the stock index price and Japanese yen exchange rate against the U.S. dollar after a ceremony marking the New Year ceremony marking the opening of trading in 2022 at the Tokyo Stock Exchang

By Junko Fujita

TOKYO (Reuters) -The Tokyo Stock Exchange (TSE) is set to remove almost 500 firms from the index of primary domestic firms in the bourse’s latest reform aimed at attracting more foreign investors.

High-end restaurant operator Hiramatsu as well as regional banks such as Nagano Bank and Tomato Bank are among the 493 companies that will be excluded from the index, according to JPX Market Innovation & Research, a unit of Japan Exchanges Group Inc.

The move follows the TSE’s biggest overhaul in a decade in April when it tightened criteria and reorganised its markets into three – “prime”, “standard” and “growth” – to highlight profitable firms whose governance meets global standards.

More than 2,000 companies which were on the main board of the exchange – now the prime market – are in the Topix. They include firms that did not meet the prime market criteria during the reform and whose shares are now traded on the two other markets.

The TSE, operated by Japan Exchanges Group, plans to gradually remove firms whose market capitalisation in tradable shares is less than 10 billion yen ($69 million) from the Topix index, which is tracked by more than 70 trillion yen worth of investment vehicles, including exchange-traded funds mainly held by the Bank of Japan.

“The impact of the reform on the index will be neutral,” said Tomoichiro Kubota, senior market analyst at Matsui Securities. “Those who will be eliminated will be sold off, while those which remain will be bought.”

The exchange will reduce the weighting of affected companies on the Topix gradually until January 2025, when those companies will be completely eliminated. Companies that fall short of the criteria can be reviewed next October.

($1 = 145.0200 yen)

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