JPX Market & Innovation: Publication Of Constituents And Methodology For JPX Prime 150 Index
As announced on March 30*1, JPX Market & Innovation, Inc. (JPXI) is working on the preparation for the "JPX Prime 150 Index," a new index focusing on value creation, and will start the calculation from July 3. We are pleased to announce that we have finalized the constituents and methodology, as you will see below.
Purpose of JPX Prime 150 Index Development
Recently, there has been increasing attention paid to the status of value creation by Japanese companies. For example, only about half of the listed companies in TSE Prime Market have a PBR (price book value ratio) exceeding 1x, which represents expectations of future value creation. Therefore, listed companies are required to be conscious of the cost of equity capital and the stock price as they manage their company.
In light of these circumstances, we have developed a new stock price index which will be composed of stocks selected to represent "Japanese companies that are estimated to create value" from among the top-ranked stocks listed on TSE Prime Market by market capitalization based on two measures of value creation: 1) "return on capital" which is based on financial results, and 2) "market valuation" which is based on future information and non-financial information.
In addition, "return on capital" above refers to the equity spread*2, which is the difference between ROE (return on equity) and cost of equity, as an indicator, whereas "market valuation" above refers to the PBR*3, which is the stock price divided by BPS (Book Value per Share), as an indicator.
The JPX Prime 150 Index is designed to make visible the leading Japanese companies that are estimated to create value, and to make the index and its constituent stocks the target of medium- to long-term investment by institutional and individual investors in Japan and abroad, thereby contributing to the penetration of value-creating management and the enhancement of the appeal of the Japanese stock market.
- When ROE exceeds the cost of equity, which is the return expected by investors, the equity spread becomes positive and the value creation is estimated.
- When the stock price exceeds the BPS, the PBR exceeds 1x, and the value creation is estimated.
Outline of the JPX Prime 150 Index
|Name||JPX Prime 150 Index|
|Concept||Index composed of leading Japanese companies that are estimated to create value|
|Stock Selection Method||[Universe Selection]
Stocks listed on TSE Prime Market. However, stocks that fall under the following as of the Selection Base Date are excluded:
・Stocks that do not meet the continued listing criteria
・Stocks designated as Securities to Be Delisted
・Stocks designated as Securities on Alert
・Stocks for which a segment transfer has been announced
[Screening by Market Capitalization]
The top 500 stocks in the universe by full market capitalization as of the Base Date shall be eligible (hereinafter the "Eligible Issues").
[Selection of Stocks by "return on capital" (Equity Spread Criteria)]
▶Issues whose equity spread of the current period and the previous period are both positive values (limited to cases where the ROE is over 8%) shall be selected (hereinafter the "Eligible Issues for Equity Spread Criteria").
▶The top 75 companies in terms of estimated equity spreads will be selected from the Eligible Issues for Equity Spread Criteria.
[Selection of Stocks by "market valuation" (PBR Criteria)]
▶Issues whose PBRs of the current period and average of two periods (the previous period and the current period) PBRs are both over 1x shall be selected (hereinafter the "Eligible Issues for PBR Criteria").
▶The top 75 companies in terms of full market capitalization will be selected from the Eligible Issues for PBR Criteria.
A constituent review will be conducted on the last business day of August each year. (The rebalance base date is the last business day of June.)
In addition, constituents review for August 2023 will be skipped and will be the first constituents review will be conducted in August 2024.
A preferential rule for constituents of the prior year selection will be established after August 2024.
|Number of Constituent Stocks||150|
|Calculation Method||Free-float adjusted market capitalization-weighted|
|Base Date / Base Value||May 26, 2023/1,000pts|
|Calculation/Distribution of Index Values||To be calculated and distributed in real time (every second) starting July 3, 2023|
|Total Return Index||Available|
|Dissemination of Index Data||Index data is provided via Index Data Service (paid service).|
The constituents as of calculation start date will be as indicated on Annex 1. In addition, the constituents review for August 2023 will be skipped and the first constituents review will be conducted in August 2024.
Use of Index
A license agreement with JPXI is required when using the index for structuring or offering financial products or providing them to third parties.
JPXI accepts license applications for ETFs based on this index as follows:
License Coverage Area: Japan
License Application Period: From May 26, 2023, to June 30, 2023*4
- Even after the License Application Period has ended, we will continue to accept applications for structuring or offering financial products, including ETFs, so please contact to Client Service Dept.
For past values and graphs, etc., please refer to Annex 2.
Please contact the following for inquiries regarding obtaining index values and licensing agreements:
(For the outline of this index and getting of Index Values)
Index Business Dept.
JPX Market Innovation & Research, Inc.
E-mail : email@example.com
(For the license of this index)
Client Services Dept.
JPX Market Innovation & Research, Inc.
E-mail : firstname.lastname@example.org