Japan will clean up small cap stocks

The Tokyo Stock Exchange will gradually exclude companies with a market capitalization of less than ¥ 10 billion ($ 96.59 million) or about 1 percent of the total value of listed shares from the Topix index.

The Tokyo Stock Exchange will reduce the proportion of small-cap stocks in the Topix index basket from 2022. Photo: AFP

This statement was made by the Tokyo Stock Exchange today on December 25, in an attempt to restructure the market. The agency also said it would establish new stock indexes from April 2022.

The Tokyo Stock Exchange’s move comes after criticism that the agency has licensed many companies with low growth prospects and weak governance, but is listed in Main indicator basket – Topix. This is the reason that analysts believe that has hindered the growth of the Topix index over the past time.

The Tokyo Stock Exchange said that it will reduce the proportion of small-cap stocks in the Topix index basket from 2022, and restructure the stock market in three smaller markets by April 2022. These include: prime market, standard market and growth market.

The high-end market will offer stricter listing criteria than those in the Topix basket, but analysts expect a large chunk of the nearly 2,200 listed Topix stocks to lift. level up to the high end market.

Tokyo Stock Exchange said, to market decentralization in the coming time, The agency also planned to set up new stock indices, and at the same time abolished a number of indices, including: TSE Mothers (the table 3 market) for emerging or growing stocks. high growth and table 2 market index for mid-sized companies.

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