Large-cap growth stocks have continued to drive Japan equity market performance, according to results of the 25th annual Russell/Nomura Japan Equity Indexes reconstitution, which concluded after the Japan equity market closed on Thursday, November 19
Today’s announcement from Nomura Securities summarizes the annual process of recalibrating the Russell/Nomura Total MarketTM Index, which represents approximately 98% of the investable Japan equity market.
For the past 25 years, the Russell/Nomura reconstitution has rebalanced the Russell/Nomura Japan Equity Indexes to account for market developments in the past year, including changes in market cap, style orientation and sector performance.
Japan equity market drivers over the past year include:
- Japanese investors continued to favor large-cap stocks in 2020. While the Russell/Nomura Total Market Cap Index has been relatively flat since last as reflected by a 1.1% rise from November 19, 2019, effective date of last year’s Russell/Nomura reconstitution through November 2, “rank day” for this year’s Russell/Nomura Reconstitution, large caps have outperformed. The Russell/Nomura Large Cap Index rose 1.6% over the past year, as compared to a 2.1% decline for the Russell/Nomura Small Cap Index*. Growth stocks were again in style for Japanese investors in 2020. The Russell/Nomura Total Market Index was rebalanced by 6.4% back to Value at this year’s reconstitution to account for a year in which growth-oriented stocks strongly outperformed value-oriented stocks in Japan. To illustrate, the Russell/Nomura Total Market Growth Index gained 12.1%while the Russell/Nomura Total Market Value Index lost 10.1% for the year ending November 2.
- The Japan Food, Electric Appliances, Land Transportation and Retail Trade industry sectors were the strongest contributors to growth-oriented Japanese stock outperformance in the past year in Japan, as reflected by 2.1%, 2%, 1.4% and 1% rebalances away from growth and towards value at this year’s Russell/Nomura Reconstitution. On the other end of the style spectrum, the Information & Communication sector was the strongest contributor to value-oriented Japanese stock performance, as the sector was rebalanced away from value and toward growth by 4.04%.
Hiromichi Tamura, head of investment research, Asia-Pacific, FTSE Russell:
“During a highly volatile year for global equity markets including Japan, Japanese equity investors have continued to gravitate toward the largest growth-oriented stocks, as reflected by this year’s Russell/Nomura index performance. In a challenging market environment, it is more important than ever that investors in Japan equities have access to benchmarks that accurately reflect the investment opportunity set. The Russell/Nomura Reconstitution has played a critical role in maintaining the ongoing integrity of the Russell/Nomura Japan Equity Indexes for the last 25 years.”
Visit the Russell/Nomura indexes reconstitution page on the FTSE Russell website for more information.
*Source: FTSE Russell, returns cited from 11/19/19 through 11/2/20, USD-based, total return.
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