TOKYO The Tokyo Stock Exchange TSE is going to announce the names of hundreds of companies that it will remove from its Topix index of primary domestic firms on Friday, in the bourse's latest reform aimed at attracting more foreign investors.
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 that were on the main board of the exchange -- now the prime market -- are now in the Topix. They include firms that did not make the prime market at the reform and whose shares are now traded on the two other markets.
The TSE, operated by Japan Exchanges Group Inc., plans to remove firms whose market capitalisation 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 held by the Bank of Japan.
According to Matsui Securities senior market analyst Tomoichiro Kubota, the impact of the reform on the index will be neutral. Those who are eliminated will be sold off, while those that remain will be bought. The exchange will reduce the weighting of affected companies on the Topix until January 2025, when those companies are completely eliminated. Companies that don't meet the criteria can be reviewed next October.