Nintendo Co., the world’s biggest maker of game consoles, is probably too big to be included in the Nikkei 225 Stock Average this year, according to analysts at Nomura Holdings Inc. and Mizuho Financial Group Inc.
Nikkei Inc., which manages the equity benchmark, said last week it will consider adding some of the most active stocks listed on the Osaka Securities Exchange after the bourse merges with the Tokyo Stock Exchange on July 16. Nintendo, which counts Osaka as its primary exchange, jumped 7 percent on June 28, the day after the announcement.
The maker of the Wii gaming console has a market value of 1.6 trillion yen ($16 billion) and traded at 11,750 yen a share as of today’s close in Tokyo. With a 3.3 percent weight on the Nikkei 225, it may be considered too large by the measure’s compilers, Nomura quantitative analysts led by Tomoyo Izumi and Mizuho analysts headed by Hayato Nagayoshi wrote on June 28.
“The inclusion of highly priced stocks will impact other companies on the measure and even the Nikkei 225 Stock Average as a whole,” wrote Nomura’s Izumi. “This may be what keeps it off the benchmark.”
The weighting would make Nintendo the fourth-most influential stock on the Nikkei 225 after Fast Retailing Co., Softbank Corp. and Fanuc Corp., respectively, according to data compiled by Bloomberg. Heavily weighted shares can leave an index vulnerable to swings from a single company. Fast Retailing, Asia’s biggest apparel retailer, was responsible for almost a sixth of the gauge’s 32 percent advance this year, according to data compiled by Bloomberg.
The skew in the Nikkei 225 caused by an individual company underscores the difference between stock averages, where ranking is determined by a share price, and most indexes, where market capitalization is key. The 62-year-old equity benchmark is the most common gauge for pricing derivatives on the country’s $4.2 trillion equity market.
Mitsubishi Paper Mills Ltd., Heiwa Real Estate Co., Takara Holdings Inc., Tokyo Dome Corp., Furukawa Co. may be removed from the Nikkei 225 as they are the least actively traded stocks on the gauge, Mizuho and Nomura said.