Japan Exchange to Keep Sliding Index Events, SMBC Says

Japan Exchange Group Inc. (8697), which doubled in value since listing in January, may continue to trim gains accumulated ahead of the bourse’s inclusion in stock indexes this week, according to SMBC Nikko Securities Inc.

Shares were included in the Topix Index (TPX) as of today and added to the MSCI All-Country World Index (MXWD) tomorrow. The so- called “index events” generated 30 billion yen in demand for the stock, which typically sees 5 billion yen in daily turnover, according to SMBC quantitative strategist Keiichi Ito. Japan Exchange fell 11 percent to close at 7,060 yen in Tokyo after yesterday surging 13 percent in the final seconds of trading.

“There’s been demand for the shares simply based on the fact of their inclusion in the indexes,” Ito said in a phone interview. “When the events are over, there should be a substantial negative impact.”

Japan Exchange, formed from the merger of bourses in Tokyo and Osaka, advanced 100 percent through yesterday after listing in Tokyo on Jan. 4. The benchmark Nikkei 225 Stock Average (NKY) climbed about 8 percent in the period.

Some 17 trades of more than 10,000 Japan Exchange shares occurred in the last 60 seconds of yesterday’s session, a day on which the average trade size was 749 shares, according to data compiled by Bloomberg. The number of shares changing hands reached 5.4 million, more than five times the 30-day average, the data show. Volume climbed to 6.9 million shares today.

“It looks like there was some very poor order placement that caused a spike,” Ito said. “That’s getting rolled back today.”

To contact the reporter on this story: Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net