Tokyo Price Index (TOPIX)

What Is the Tokyo Price Index (TOPIX)?

The Tokyo Price Index — regularly alluded to as TOPIX — is a measurement at stock costs on the Tokyo Stock Exchange (TSE). TOPIX is a capitalization-weighted index that rundowns all organizations in the "main section" of the TSE, a section that coordinates generally large firms on the exchange into one group. The second section of the TSE pools the more modest excess companies as a whole.

Understanding the Tokyo Price Index (TOPIX)

The Tokyo Stock Exchange (TSE) is the largest stock exchange in Japan and is responsible for working out and distributing the TOPIX. Compared to the Nikkei, or Japan's Nikkei 225 Stock Average, the TOPIX is viewed as a more proper representation of the multitude of Japanese stock markets since it mirrors a fairer portrayal of price changes and incorporates the largest companies trading on the TSE. In comparison, the Nikkei is weighted by price and is made out of just the main 225 blue chip companies listed on the TSE.

The Sector Indices of TOPIX

TOPIX shows the current market capitalization of companies expecting that market capitalization as of the base date (Jan. 4, 1968) is 100 points. The measure is utilized to decide the overall trend in the stock market and is utilized as a benchmark for investors.

The sector indices of TOPIX are made out of indices made by isolating the constituents of TOPIX into 33 categories. These not set in stone as per the industrial sectors defined by the Securities Identification Code Committee. They incorporate yet are not limited to, construction, materials and apparels, nonferrous metals, machinery, electric power and gas, land and air transportation, retail trade, banks, securities and commodity futures, real estate, insurance, agriculture and ranger service, drugs, and iron and steel.

TOPIX has some subindices that are likewise distributed by the TSE. These incorporate however are not limited to, the TOPIX New Index Series, size-based TOPIX subindices, TOPIX sector indices, the Tokyo Stock Exchange Composite Index Series, the Tokyo Stock Exchange Dividend Focus 100 Index, the Tokyo Stock Exchange REIT Property Sector Index Series, and the Tokyo Stock Exchange Mothers Index.

TOPIX as Free Float Index

In a series of three phases, TOPIX progressed from a system that weighted companies based on a collective total figure of outstanding shares to a system that weights companies based on the total number of shares accessible for trade. This is known as a free float. TOPIX's change started in 2005 and was completed in the mid year of 2006.

Albeit this change is, basically, a detail, it considerably affects the real weight of companies listed in the index. This is on the grounds that a large majority of companies in Japan likewise have huge holdings of shares in their business partners to keep up with sophisticated and strong business unions, and these shares are not generally remembered for the index's company weight calculation.

The Japanese practice of business partners having close associations with each other and in some cases taking equity stakes in one another is called keiretsu, which deciphered in a real sense means "headless consolidate."

Special Considerations

One of several TOPIX indices is the TOPIX Core 30 Index. The capitalization-weighted index tracks the performance of 30 stocks in the TOPIX index that have large market capitalizations and are the most liquid. The index began on April 1, 1998 with a base value of 1,000. The rundown of companies in the TOPIX Core 30 incorporate a portion of Japan's most notable names, like Honda Motor, Canon, Mitsubishi Corp., Sony, and Toyota Motor.

Investors can't straightforwardly purchase an index. Notwithstanding, there are exchange traded funds (ETFs) that empower investors to invest in a basket of securities that tracks the performance of the TOPIX. The Nomura Asset Management Company runs the TOPIX Core 30 Exchange Traded Fund (ETF). The fund's investment objective is to build a portfolio that is comparative in piece to the TOPIX Core 30, giving relating price and yield performance.

Features

• TOPIX tracks domestic companies in the exchange's most memorable section, which addresses Japan's largest firms by market capitalization.
• The Tokyo Price Index, known as TOPIX, is a Japanese stock market index calculated and distributed by the Tokyo Stock Exchange (TSE).
• While investors can't straightforwardly purchase an index, there are several exchange traded funds (ETFs) —, for example, the TOPIX Core 30 ETF — that empower investors to invest in a basket of securities that tracks the performance of the TOPIX.
• Another Japanese stock index is the Nikkei, which is a price-weighted index involved the main 225 blue chip companies traded on the TSE.