What Is the Nikkei 225 Index and How Can You Trade It? IG International

This is because the index itself is there for tracking purposes only, rather than acting as a direct financial instrument. Firstly, it is important to remember that if you are looking to invest in the performance of the Nikkei 225, it would not make financial sense to do it by backing the individual companies that make the index yourself. Outside of conventional equities, the Tokyo Stock Exchange also lists a number of other financial securities. IG International Limited is licensed to conduct investment business and digital asset business by the Bermuda Monetary Authority. Another way of getting exposure is trading individual Nikkei stocks, such as car manufacturers Toyota and Nissan or electronics producers Sony and Panasonic. These funds won’t mirror the Nikkei price directly, and instead will be linked to the ETF’s net asset value.

  1. Among the best-known companies included in the Nikkei index are Canon Incorporated, Sony Corporation, and Toyota Motor Corporation.
  2. Outside of conventional equities, the Tokyo Stock Exchange also lists a number of other financial securities.
  3. For those unaware, in the mid-to-late 1980s, the Japanese economy experienced one of the biggest financial bubbles that the world has ever seen.
  4. For those not familiar with the Yen, that amounts to GBP£270 billion or US$357 billion.
  5. First and foremost, tracking the performance of more than 3,500 companies would be a logistical nightmare, especially when one considers the amount of trading that occurs on a daily basis.
  6. The great thing about the Tokyo Stock Exchange is that it has a number of indexes that allows investors to speculate on the market in its entirety, rather than backing specific companies.

An ETF that tracks it and is denominated in U.S. dollars is the MAXIS Nikkei 225 ETF. Most ETFs tracking the Nikkei are denominated in Japanese yen, including the Daiwa Asset Management ETF and the iShares Core Nikkei 225 questrade forex ETF. Sectors represented in the index include technology, financials, consumer goods, materials, capital goods, transportation, and utilities. In all, the Nikkei index comprises companies from 36 different industries.

Trade on individual Nikkei 225 stocks

It is not possible to directly purchase an index, but there are several exchange-traded funds (ETFs) whose components correlate to the Nikkei. ETFs that track the Nikkei and trade on the Tokyo Stock Exchange include Blackrock’s iShares Nikkei 225 and Nomura Asset Management Nikkei 225 Exchange Traded Fund. The MAXIS Nikkei 225 Index ETF is a dollar-denominated fund that trades on the New York Stock Exchange.

The Japan 225 index is reviewed once a year at the beginning of October, and is calculated in real-time with updates every 15 seconds. In other words, those involved in the Nikkei 225 investment space back in the mid-to-late 1980s would have no doubt been hit hard by the crash. On the other hand, the index has been performing reasonably well since late 2012, where it was priced in the region of 8,00 points. In fact, at the time of writing in March 2019, the Nikkei 225 index is positioned at just over 21,500 points.

Investing in the Nikkei 225 via an Index Fund

However, you can gain exposure to this index through buying shares of an ETF that tracks the Nikkei. One of the leading index funds in this respect is the Daiwa Japan Nikkei 225 Index Fund. With an expense ratio of just 0.16%, this particular fund is one of the most competitively priced in the space. The fund aims to replicate the performance of the Nikkei 225 by purchasing the shares that constitute the index. As such, you will need to use a third party institution that tracks the Nikkei 225 index themselves.

Stay on top of upcoming market-moving events with our customisable economic calendar. Discover the range of markets and learn how they work – with IG Academy’s online course. In 1943, during the Second World city index review War, the Japanese government combined the TSE with five others to form a single Japanese Stock Exchange. The Tokyo Stock Exchange re-opened on May 16, 1949, under the aegis of the Securities Exchange Act.

Key data points

However, and perhaps more importantly, the vast majority of the Japanese stock marketplace is dominate by the companies sat at the very top of the market capitalization rankings. Nikkei Inc. has developed and calculated its own indexes from various perspective, looking at changes in society and markets. The Nikkei is price-weighted, which means the index is an average of the share prices of all the companies listed. Because each company’s stock is weighted by its price per share, the Nikkei tends to be influenced by high-priced stocks such as technology stocks. As an individual outside of Japan, the best way to gain exposure to Japanese companies is through American Depository Receipts (ADRs) or exchange-traded funds.

Investing in the Nikkei 225 via an Exchange Traded Fund (ETF)

Like the Dow Jones Industrial Average, the Nikkei 225 Stock Average is a price-weighted equity index. Ranking of companies is determined by stock price, which differs from other major indexes where market capitalization is used in calculations. The Nikkei 225 index, or JPN225, is a price-weighted stock market index for the Tokyo Stock Exchange, measuring the performance of 225 publicly-owned Japanese companies across blackbull markets review a wide range of sectors. View the chart for real-time information on the Nikkei 225 live price and follow the latest Nikkei news and market outlook to boost your technical and fundamental analysis. The shares included in it are weighted according to price; the index level represents the average of the shares included in it. Dividend payments and stock market turnover are not considered when calculating the index.

Therefore, and as the name suggests, the Nikkei 225 includes 225 of Japan’s biggest companies. In order to determine what companies to list, the Nikkei will typically select its constituents by the size of their market capitalization. However, this only includes blue-chip companies, and thus, excludes the likes of ETFs and other non-equity based securities. Make sure you follow the live Nikkei 225 price with our interactive price chart, and keep up to date with the latest Nikkei 225 news and analysis. Our analyst articles offer in-depth insights on the Nikkei 225 and its constituent stocks to inform your trading.

In this piece, we explore what the Nikkei 225 represents, its history, the companies that constitute the index, and how to approach trading it. The index fund will most commonly replicate the performance of the Nikkei 225 by actually purchasing the underlying shares of the companies that make the index. As noted above, this would be a complex task for an individual investor to perform independently, however institutions have the required framework to do this. The Nikkei 225 index offers traders and investors an avenue to get exposure to the entire Japanese economy in a single position.

The Nikkei average has deviated sharply from the textbook model of stock averages, which grow at a steady exponential rate. The Nikkei 225 Stock Average is Japan’s primary stock index and a barometer of the Japanese economy. It gauges the behavior of top Japanese companies, covering a broad swath of industries. Broadly considered Japan’s equivalent to the Dow Jones Industrial Average, it includes the top 225 blue-chip companies listed on the Tokyo Stock Exchange.

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