JPX-Nikkei 400 futures debut amid growing ROE interest

martes 25 de noviembre de 2014 03:19 GYT
 

* JPX-Nikkei 400 hits 70,000 futures contracts
    * New index futures could outperform Nikkei, Topix - analyst

    By Ayai Tomisawa
    TOKYO, Nov 25 (Reuters) - The Osaka Exchange started trading
of the JPX-Nikkei Index 400 futures on Tuesday amid increasing
interest from foreign investors seeking long-term investment in
companies with a relatively high return on equity.
    The new JPX-Nikkei Index 400 futures is based on
the JPX-Nikkei Index 400, a benchmark introduced
this year comprising firms with high ROE and strong corporate
governance. It was jointly developed by Japan Exchange Group and
Nikkei Inc.
    The index has been endorsed by some of Japan's most
influential financial institutions.
    Last month, the Bank Of Japan said it will buy
exchange-traded funds that track the JPX-Nikkei 400 when it
tripled annual purchases of ETFs to about 3 trillion yen.
    The Government Pension Investment Fund, Japan's $1.1
trillion public pension fund, has also adopted it as a benchmark
for some of its domestic equity portfolios.
    Traders expect similar moves by other public and private
pension funds will follow as investors place a higher premium on
ROE.
    "More and more cash-rich companies are responding to such
investor expectations by announcing share buybacks," said
Michiro Naito, executive director in equity derivatives and
quantitative strategies at JPMorgan, who added it was possible 
the JPX-Nikkei 400 could outperform the Nikkei or the Topix in
the future.
    "If speculative traders start trading on the futures and
volume rises, arbitrage traders will likely follow suit, and I
can see that its price and volume will be ballooning in the
future," he said.
    Japanese companies have famously poor ROE. On average, they
produce a net return of 8.6 cents on each dollar of
shareholders' equity, compared with 15.1 cents in the United
States, according to Thomson Reuters Starmine data.
    JPX-Nikkei Index 400 futures ended at 12,890 points, with
70,319 contracts struck, while Nikkei futures added 0.3
percent to 17,430 points, with 70,348 contracts and the Topix
futures gained 0.6 percent to close at 1,411.00 with
49,210 contracts.     

 (Editing by Eric Meijer)