Japan’s startup index outperforms Topix by most since April

JAPAN’S startup equity gauge is outperforming the broader market by the most in over four months, as investors shift focus into domestic small and mid-cap stocks that benefit from yen strength. 

The Tokyo Stock Exchange Growth Market 250 Index, formerly known as the Mothers Index, rose 3.4 per cent over the past month, compared with a 1.7 per cent decline in the overall Topix Index. The smaller index holds tech startups and companies that have domestic revenues, which tend to do better when the yen is stronger.

“Real wages and GDP have been going up and with exchange rates swinging so sharply, there is focus on domestic related stocks,” said Naoki Fujiwara, a senior fund manager at Shinkin Asset Management. “Overall funds are shifting from large-cap stocks to small and mid-cap stocks,” he added. 

The index rose as much as 4.1 per cent on Monday, though Fujiwara warned the move may be short-lived as there is still caution among investors on how fast the Bank of Japan could raise interest rates, which would essentially turn the tide back toward large-cap value stocks. BLOOMBERG