Tokyo exchange to remove nearly 500 firms from Topix index - Reuters

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TOKYO, Oct 7 (Reuters) - The Tokyo Stock Exchange (TSE) is set to remove almost 500 firms from the Topix index (.TOPX) of primary domestic firms in the bourse's latest reform aimed at attracting more foreign investors.

High-end restaurant operator Hiramatsu (2764.T), funeral services provider Kosaido Holdings (7868.T), as well as regional banks such as Nagano Bank (8521.T) and Tomato Bank (8542.T) 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 (8697.T).

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. read more

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 total market value of tradable shares of the affected companies is 2 trillion yen compared to the 385 trillion yen market value of tradable shares of all the Topix firms, according to JPX Market Innovation & Research.

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)

Reporting by Junko Fujita; Editing by Christopher Cushing and Christian Schmollinger

Our Standards: The Thomson Reuters Trust Principles.

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