Over 600 companies likely to be culled in Topix index’s biggest overhaul, analysts say
Companies whose free-float market capitalization ranks in the bottom 3% of Tokyo Stock Exchange-listed firms will be phased out over two years beginning in October.
Japan's Topix stock index is set to undergo its largest overhaul in history, with over 600 companies potentially being phased out, according to analysts. This significant change, estimated to commence in October, will see companies with a free-float market capitalization in the bottom 3% of Tokyo Stock Exchange-listed firms gradually removed from the benchmark over a two-year period.
The removal, which could impact around a third of the index's constituents, is expected to create a frantic scramble among smaller firms this month to avoid being marked for elimination. Ejection from the index would sever companies' access to an estimated $1 trillion in assets held by passive funds that follow the Topix, potentially impacting their share prices negatively.
This overhaul is a direct response to ongoing criticism from investors that the benchmark includes too many small and illiquid stocks, making it more costly and cumbersome to replicate.
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