Tokyo Stock Exchange moves to weed out tiny firms from Topix, start new index

Tokyo Stock Exchange moves to weed out tiny firms from Topix, start new index

TOKYO: The Tokyo Stock Exchange said on Friday it will gradually remove companies with market capitalisation of less than 10 billion yen ($96.59 million), or about 1 percent of all listed shares, from its main Topix index.

The stock exchange also said that it will start new stock indices in April 2022, when it will reorganize its market structure, now consisting of the massive main board and three smaller sections.

The move came in the context of criticism that the stock market allows many companies with limited growth prospects and weak governance standards to remain listed on the main board, which many say hinders earnings from the Topix index.

TSE said it will start reducing the share of small-cap stocks in Topix starting in 2022.

The stock exchange said it will reorganize the stock exchange into three sections – provisionally called the primary market, the standard market and the growing market, respectively – in April 2022.

The primary market will have a slightly stricter listing criteria than the current main board, but analysts expect a large proportion of the nearly 2,200 companies currently listed to move to the primary market.

The TSE has stated that it intends to introduce new stock indices and remove some indices, including the TSE mothers index and the second section index, to reflect future reclassification.

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