Tokyo needs foreigners to revitalise volumes

Trading in Japan has remained strong in 2015, continuing a trend that took turnover  up to a daily average level of JPY 2.5 trillion.Nevertheless, a new incentive is needed this year.

Trading in Japan has remained strong in 2015, continuing a trend that took turnover  up to a daily average level of JPY 2.5 trillion.  Nevertheless, a new incentive is needed this year.

The exchange-traded fund market has also been active, with total trading value in January JPY 3.96 trillion, as the market continued to be busy. In the REIT market, January trading value was JPY 980 billion. The TSE REIT Index also reached a seven-year high of 1,990.45 points during the first month of the year.

However, in order to propel Tokyo trading back up to the levels of May 2013, some extra effort is needed, and that probably means more interest from foreign investors in the Japan story.

“This year’s daily Tokyo Stock Exchange (TSE) market turnover is about JPY 2.25 trillion compared to JPY 2.55 trillion last year. It looks like this year’s volumes are a little less than the last year,” said Akihiro Ohara head of Japanese sales trading at Societe Generale. “Foreign clients have between 68%-74% market share of the TSE. If we see more inflows from them, volumes might pick up more from here.”

The Japan Exchange Group (JPX) has also published its overview of earnings for Q3 in the 2015 financial year (from April to the end of December 2014).

Net income has remained strong due to cost reductions offsetting a decline in revenue from last years ‘booming conditions’. JPX projects a 10% increase in the full year’s operating income.

In terms of the average daily trading volume of the exchange’s major products, during the third quarter, cash equities trading value was up 12%, and JPX revised estimates predict a 16% jump for equities trading value for the entire financial year.  Market capitalisation exceeded JPY 500 trillion for the first time in approximately seven years.

TOPIX futures trading volumes increased 12% in the third quarter and the exchange projects a 16% increase for the full year. Since the derivatives market integration at the beginning of last year, TOPIX futures trading volumes have been close to record highs. JPX also predicts that Nikkei 225 Futures trading volumes will increase by the same percentage. It said that derivatives trading volumes grew on greater volatility, but remained lower year-on-year, due to light trading in the first half.

In the last two months, JPX says it has moved ahead with its pan-Asian strategy, with more plans emerging about the new Yangon stock exchange in Myanmar, a tie-up with the Singapore Exchange and the opening of a new representative office in Hong Kong.