(Bloomberg) -- Shares in Japan Exchange Group Inc. gained in Tokyo after it was selected to join the country's blue-chip index.
The operator of the Tokyo and Osaka exchanges will join the Nikkei 225 on July 29, Nikkei Inc. announced on Wednesday, following the buyout of Sony Financial Holdings. SMS Co. Ltd will replace Sony Financial on the Nikkei 500 index.
Japan Exchange shares rose as much as 5.8% in Tokyo trading on Thursday, briefly touching a record high. Japan Post Bank Co., which had been suggested as a candidate, dropped 1.9%. Japan Exchange Group was formed in 2013 from a merger of the country's two largest bourses as part of government plans to boost the country's financial markets.
When a component of the Nikkei 225 is delisted or removed, Nikkei Inc. generally replaces it with a stock from the same sector that has high liquidity. The reshuffle typically triggers moves in potential replacements, with funds tracking the index needing to buy and sell to reflect the changes, and speculators moving to profit in advance of that requirement.
Japan Exchange had been the pick of Daiwa Securities analyst Junichi Hashimoto. “We estimate a trading impact from portfolio rebalancing by passive index funds of about 18.5 days for 25.7 million shares,” he wrote in a reported dated Wednesday.
Nikkei's announcement came earlier than usual, after a tweak to its rules that allowed it to name the replacement stock once the likelihood of the existing stock on the index being delisted was “extremely high.” Sony announced on Tuesday that its tender offer for Sony Financial had been successful.
The change is not the only one set to shake up the index this year. Trading house Itochu Corp.'s plans to buy out its convenience store chain FamilyMart Co. will also free another slot once the deal goes through. Possible contenders to replace it include price-comparison site operator Kakaku.com Inc., online mall Zozo Inc., and drinks maker Suntory Beverage & Food Ltd.
Read more: Zozo, Square Enix Surge as Investors Eye Nikkei 225 Candidates
The tender offer for FamilyMart is slated to run until August 24, assuming it doesn't meet regulatory or investor opposition. Given the timeline, the chain's replacement may come during the Nikkei 225 periodic rebalancing, typically announced in early September, which could allow for further sector rebalancing.
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