Japan's TSE second section index of smaller capitalized companies that usually trades at a discount to both the TSE 1 and the JASDAQ has risen for 26 consecutive days, the longest streak of consecutive gains since May 13, 1975, according to Bloomberg. The TSE2 index still trades at an average of 0.68 nominal book value compared with about 1.24X for the Nikkei 225 index.
Behind this move are domestic institutional investors, who got burned badly by their traditional preference for the large-cap stocks, as the Topix Core 30 index of Japan's largest capitalized stocks swooned last year, prompting the typically trend-following and slow-moving domestic institutions (managing public pension funds) to break away from their traditional large cap preference and move into smaller capital stocks....but not too small as for these institutions to be trapped in illiquid names.
Whether this shift is enduring enough to cause a permanent re-rating of the TSE2 remains to be seen. There is a reason for the TSE2 discount, and that is the fact that many stocks listed on the TSE2 were tightly held stocks with limited floats because of large holders, more often than not their parent company.
Bloomberg
Behind this move are domestic institutional investors, who got burned badly by their traditional preference for the large-cap stocks, as the Topix Core 30 index of Japan's largest capitalized stocks swooned last year, prompting the typically trend-following and slow-moving domestic institutions (managing public pension funds) to break away from their traditional large cap preference and move into smaller capital stocks....but not too small as for these institutions to be trapped in illiquid names.
Whether this shift is enduring enough to cause a permanent re-rating of the TSE2 remains to be seen. There is a reason for the TSE2 discount, and that is the fact that many stocks listed on the TSE2 were tightly held stocks with limited floats because of large holders, more often than not their parent company.
Bloomberg