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Nikkei 225

Japanese stock market index From Wikipedia, the free encyclopedia

Nikkei 225
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The Nikkei 225, or the Nikkei Stock Average (Japanese: 日経平均株価, Hepburn: Nikkei heikin kabuka), more commonly called the Nikkei or the Nikkei index[1][2] (/ˈnɪkeɪ, ˈniː-, nɪˈkeɪ/), is a stock market index for the Tokyo Stock Exchange (TSE). It is a price-weighted index, operating in the Japanese Yen (JP¥), and its components are reviewed twice a year. The Nikkei 225 measures the performance of 225 highly capitalised and liquid publicly owned companies in Japan from a wide array of industry sectors. Since 2017, the index is calculated every five seconds.[3] It was originally launched by the Tokyo Stock Exchange in 1950, and was taken over by the Nihon Keizai Shimbun (The Nikkei) newspaper in 1970, when the Tokyo Exchange switched to the Tokyo Stock Price Index (TOPIX), which is weighed by market capitalisation rather than stock prices.[4]

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Nikkei 225 Index
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History

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The Nikkei 225 began to be calculated on 7 September 1950, retroactively calculated back to 16 May 1949, when the average price of its component stocks was 176.21 yen.[5][6] Since July 2017, the index is updated every 5 seconds during trading sessions.[5]

The Nikkei 225 Futures, introduced at Singapore Exchange (SGX) in 1986, the Osaka Securities Exchange (OSE) in 1988, Chicago Mercantile Exchange (CME) in 1990, is now an internationally recognized futures index.[7]

The Nikkei average has deviated sharply from the textbook model of stock averages, which grow at a steady exponential rate. During the Japanese asset price bubble, the average hit its bubble-era record high on 29 December 1989, when it reached an intraday high of 38,957.44, before closing at 38,915.87, having grown sixfold during the decade. Subsequently, it lost nearly all these gains, reaching a post-bubble intraday low of 6,994.90 on 28 October 2008 — 82% below its peak nearly 19 years earlier.[8] The 1989 record high held for 34 years, until it was surpassed in 2024 (see below).

On 15 March 2011, the second working day after the massive earthquake in the northeast part of Japan, the index dropped over 10% to finish at 8,605.15, a loss of 1,015 points. The index continued to drop throughout 2011, bottoming out at 8,160.01 on 25 November, putting it at its lowest close since 31 March 2009. The Nikkei fell over 17% in 2011, finishing the year at 8,455.35, its lowest year-end closing value in nearly thirty years, when the index finished at 8,016.70 in 1982.[9]

The Nikkei started 2013 near 10,600, hitting a peak of 15,942 in May. However, shortly afterward, it plunged by almost 10% before rebounding, making it the most volatile stock market index among the developed markets. By 2015, it had reached over 20,000 mark, marking a gain of over 10,000 in two years, making it one of the fastest growing stock market indices in the world. However, by 2018, the index growth was more moderate at around the 22,000 mark.[citation needed]

There was concern that the rise since 2013 was artificial and due to purchases by the Bank of Japan ("BOJ").[10][11] From a start in 2013, by end 2017, the BOJ owned circa 75%[12] of all Japanese Exchange Traded Funds ("ETFs"), and were a top 10 shareholder of 90% of the Nikkei 225 constituents.[13][14]

On 15 February 2021, the Nikkei average breached the 30,000 benchmark, its highest level in 30 years, due to the levels of monetary stimulus and asset purchase programs executed by the Bank of Japan to mitigate the financial effects of the COVID-19 pandemic.[15]

On 22 February 2024, the Nikkei reached an intraday high of 39,156.97 and closed at 39,098.68, finally surpassing its 1989 record high, an important milestone since the Japanese asset price bubble.[16] On 4 March 2024, the index surpassed 40,000 (intraday and closing) for the first time in history.[17]

On 5 August 2024, amid a global stock market decline, the Nikkei dropped by more than 4,200 points, surpassing 1987's Black Monday as its biggest single-day drop in history.[18] The following day, it bounced back by more than 3,200 points, the largest single-day gain in history.[19]

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Weighting

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The index is a price-weighted index. The index is calculated as follows:[20]

, then

  • Price is the stock price of a component.
  • AdjFactor is the price adjustment factor.[clarification needed]
  • AdjPrice is the adjusted price of the stock after multiplying by the adjustment factor.
  • Divisor is the index divisor.[clarification needed]

As of July 2024, the company with the largest influence on the index is Fast Retailing (TYO: 9983), at about 10% weight.

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Contract specifications

The Nikkei 225 is traded as a future on the Osaka exchange (OSE). The contract specifications for the Nikkei 225 (OSE ticker symbol JNK) are listed below:

Contract Specifications[21]
Nikkei 225 (JNK)
Contract Size: Nikkei 225 Index X Y1,000
Exchange: OSE
Sector: Index
Tick Size: 10
Tick Value: 10000 JPY
Big Point Value (BPV): 1000
Denomination: JPY
Decimal Place: 0

Annual returns

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The following table shows the annual development of the Nikkei 225, which was calculated back to 1914.[22][23][24]

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Components

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Components grouped by GICS sector
  1. Energy (0.3%)
  2. Materials (7%)
  3. Industrials (18%)
  4. Consumer discretionary (21%)
  5. Consumer staples (5%)
  6. Healthcare (10%)
  7. Financials (3%)
  8. Information technology (24%)
  9. Communication services (9.5%)
  10. Utilities (0.2%)
  11. Real estate (2%)

It is not recorded how components were originally selected, or why there are 225 components. Today, components are selected by "considering the weights of the industrial sectors".[clarification needed] Constituents must be highly traded ("liquid"). Constituents are changed either at periodic review one per year, or by "extraordinary replacement", for example if a company is delisted.[20]

As of October 2023, the Nikkei 225 consists of the following companies (Japanese securities identification code in parentheses):[25] Bold indicates the top ten by market capitalisation.

Air transport

Automotive

Banking

Chemicals

Communications

Construction

Electric machinery

Electric power

Fishery

Foods

Gas

Glass & ceramics

Insurance

Land transport

Machinery

Marine transport

Mining

Nonferrous metals

Other financial services

Other manufacturing

Petroleum

Pharmaceuticals

Precision instruments

Pulp & paper

Railway/bus

Real estate

Retail

Rubber

Securities

Services

Shipbuilding

Steel

Textiles & apparel

Trading companies

Warehousing

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See also

References

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External links

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