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The S&P 500 (SP500)(SPY)(VOO) is not the world’s only equity index that’s top-heavy and soaring to new heights.
Apollo Global Management noted Wednesday that Japan’s Topix index, which tracks +2100 corporate issues, is being dominated by the biggest 30 stocks. The biggest stocks – which include Toyota Motor (TM) and Mitsubishi UFJ Financial Group (MUFG) – now make up 40% of the index.
“Concentration is also a major challenge for the Japanese stock market,” Apollo’s Chief Economist Torsten Slok said in a blog post. Stock concentration on the S&P 500 (SP500)(IVV) has been a key market narrative, with mega-cap tech stocks including Nvidia (NVDA) and Meta (META) driving much of the index’s +15% gain to fresh all-time highs in 2024.
Last year, the price appreciation of the so-called Magnificent Seven group of stocks accounted for more than one-half of the +26% gain in the S&P 500 (SP500), Morgan Stanley (MS) said last month. The concentration of the U.S. stock market, measured as the weighting of the top 10 stocks, nearly doubled to 27% from 14% in the decade ended in 2023, MS also said.
Meanwhile, the Topix has surged to all-time highs this year and has jumped about 21% YTD. Japanese exporters are being aided by the yen’s (JPY:USD)(USD:JPY) +12% slide against the U.S. dollar. Interest-rate differentials between Japanese and U.S. government bonds have been a major force sending Japan’s currency to three-decade lows.
Japan’s Nikkei 225 index (NKY:IND) has also jumped to all-time highs and has advanced 22% YTD. Japan shifting to an inflationary economy and corporate governance reforms are two important structural changes in the Japanese stock market, according to Goldman Sachs strategists.
Here’s a look at the Topix’s 10 biggest stocks and their weights:
- Toyota Motor (TM) – Weight: 4.77%
- Mitsubishi UFJ Financial Group (MUFG) – Weight: 2.54%
- Sony (SONY) – Weight: 2.31%
- Hitachi (OTCPK:HTHIY) – Weight: 2.00%
- Tokyo Electron (OTCPK:TOELY) – Weight: 1.82%
- Sumitomo Mitsui Financial (SMFG) – Weight: 1.81%
- Keyence (OTCPK:KYCCF) – Weight: 1.80%
- Mitsubishi Corp. (OTCPK:MSBHF) – Weight: 1.72%
- Mitsui & Co. (OTCPK:MITSY) – Weight: 1.61%
- Recruit Holdings (OTCPK:RCRRF) – Weight: 1.50%
ETFs focused on Japan include (EWJ), (DXJ) and (FLJP).