JPX-Nikkei 400 futures debut amid growing ROE interest
* 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)
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