What are Nikkei 225 and TOPIX Indexes and How to Invest Them on Moomoo
1.0 Japanese stock market maintains strong rally
In the first quarter of 2024, the Nikkei 225 index soared by 8.4% in January and 7.9% in February. In march 2024, it broke the 40000 point barrier and hit a new high, which represents the "lost 20 years" comes to an end. The Nikkei 225 index and the TOPIX index are two main indexes in the Japanese stock market. The Nikkei 225 index is the key index of the Japanese stock market, while the TOPIX index contains the broadest coverage of constituent stocks. This article will analyse those two indexes, including their compilation principles, constituent stocks, related ETFs etc.
The Nikkei 225 index is Japan's price-weighted index tracking 225 leading companies. It selects the most traded stocks from the market with the usage of price-weighting, which is similar to the Dow Jones Industrial Average in the US market.
The index is calculated as follows:
Nikkei Stock Average = Σ Adjusted stock price of the constituent stocks (225) / Divisor
Adjusted Stock Price = Market price of the stock (in yen) x Price conversion factor
The calculation is conducted biannually to adapt to changes.
The TOPIX Index, introduced by the Tokyo Stock Exchange in 1969 and market capitalization-weighted, reflects a broader market spectrum with over 2100 stocks, emcompassing about 95% of Japan's market value. TOPIX uses a market capitalization-weighted approach which covers 95% of Japan's market value. This method ensures that larger companies have a proportinate influence with a cap of 10% per stock. Compared to price-weighting, market value-weighting is more representative, as it aligns a company's influence with its overall market strength.
2.0 Industry distribution and top constituent stocks of Nikkei 225 and TOPIX Index
The Nikkei 225 Index includes six sectors: consumer services, technology, finance and materials. As of February 2024, the technology sector with 61 stocks weight 51.1%, while consumer service occupied 23.1% with 37 stocks. These two portions comprise 74.5% of the index. In terms of individual stocks, the top 10 weighted constituent stocks account for approximately 42.3% of the Nikkei 225 Index, in which Fast Retailing ranges the top weight.
TOPIX Index contains wider sectors in comparison with the Nikkei 225 Index. As of January 2024, the electronics sector was the largest with 17.4% weight, followed by transportation equipment with 8.7% weight. The information and communication sector took a portion of 7.5%. In the TOPIX Index, the top 10 constituent stocks account for 20.8% of the index, with Toyota holding the largest weight, followed by Sony and Mitsubishi UFJ Financial Group.
3.0 How to invest the Nikkei 225 and TOPIX Indexes on Moomoo
Investing ETFs (exchange-trade funds) is a common way to invest these two indexes. There are 7 ETFs tracking the Nikkei 225, in which the NEXT FUNDS Nikkei 225 ETF is the largest one. 6 ETFs tracking the TOPIX Index, with NEXT FUNDS TOPIX ETF being the largest one.
To trade the ETFs which track the Nikkei 225 or the TOPIX Index on Moomoo SG, you can follow these 3 step: Click Markets > JP > ETF
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