The composition of the JPX-Nikkei Index 400 is to change for the first time since the index was created in January this year.
Of the 400 stocks that comprise the index, 31 will be replaced.
Names suffering from declining profitability, such as Sony and Watami, will be removed, while new constituents, such as Panasonic and Calbee, will be added.
The JPX-Nikkei 400 is a stock price index comprised of 400 names selected from about 3,400 stocks listed on the TSE, including those listed on the markets for start-ups. These 400 component stocks are subject to a review every year in August. In contrast to the Tokyo Stock Price Index (known as the TOPIX), which reflects the movements of the broad stock market, or the Nikkei 225, whose components are selected largely based on their market capitalisation and liquidity, the companies in the JPX-Nikkei 400 are selected based on ROE, which measures how efficiently shareholder capital is being used, and on an evaluation of their corporate governance frameworks.
The JPX-Nikkei 400 is comprised of stocks which are viewed highly by the market in terms of earnings and management quality, and the index is now being used as the investment benchmark for Japan’s Government Pension Investment Fund (GPIF), the world’s largest pension fund.