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19/10/2021

Nikkei 225: 2021 values and investment

The Nikkei 225, or Japan’s Nikkei 225 Stock Average, is Japan's main stock index. It is an important indicator for investors interested in the assets of Japanese companies. It is the price index of the 225 largest companies listed on the Tokyo Stock Exchange. The Nikkei 225 may also be of interest to those who are looking to invest in exchange traded funds.

Presentation of the Nikkei 225

History

The Nikkei was first calculated on May 16, 1949 before its release on September 7, 1950.

For the Nikkei, the Tokyo Stock Exchange adopts the same method of calculation as the Dow Jones. It is calculated directly by an arithmetic average of the stocks that make it up. In other words, the calculation does not take into account the weight of the market capitalization of each stock.

In 1969, the Tokyo Stock Exchange gave up the index and replaced it with the Tokyo Stock Index. The Japanese business daily, the Nihon Keizai Shimbun, then took over the calculation of the index. The newspaper then renamed the index after the abbreviation of its name.

Since July 1, 1970, a committee of the Nihon Keizai Shimbun has selected the 225 stocks that make up the Nikkei 225 index.

Composition of the Nikkei

The Nikkei index is made up of world-renowned leading companies from six sectors, namely finance, materials, technology, capital goods, consumer goods, and transportation and community services.

These companies enable Japan to enjoy its current industrial, technological and economic strength. They are also among the stocks that give the Tokyo Stock Exchange its place in the world market. As a reminder, the Tokyo Stock Exchange is the fourth largest stock exchange in the world and the largest in Asia.

The list of stocks in the Nikkei is updated every year. This means that some companies are removed from the list and others are added in their place. But the majority of Japanese multinational companies are included. These include:

  • Bridgestone
  • Casio
  • Daiwa
  • Hitachi
  • Kirin
  • Mazda
  • Mitsui O.S.K. Lines
  • Rakuten
  • Seiko
  • Sony
  • SoftBank
  • Tokyo Gas
  • Toyota Motor
  • Yamaha

Some more information about investing in Nikkei 225

Tokyo Stock Exchange market opening hours

Live trading on the Japan Stock Exchange involves working within the opening hours of this financial center, and time difference needs to be taken into account if you live in France or in neighboring European countries. The Tokyo Stock Exchange is open from 9 to 11 am and from 1 to 3 pm (local time). This corresponds to a time range of 1am and 7am in Europe.

Nikkei Currency

The Nikkei 225 uses the Japanese Yen. In addition to tracking the price of the index, you should also keep track of the real time exchange rate between the Yen and the Euro.

Other information

  • Isin code: JP9010C00002
  • Taxed margin: 2%.
  • Leverage: 400:1

Nikkei 225 Value

Nikkei 225 Index Price History

The Nikkei index reached its all-time high on December 29, 1989, when it recorded 39,915.87 points. It never reached this level again until May 2021. It reached its all-time low in March 2009 when it closed at 7173.10 points. In the meantime, it had already fallen to around 15,000 points in 1992.

Current price of the Nikkei 225

Like most stock market indexes, the Nikkei 225 fell in 2020 due to the Covid-19 pandemic. However, it had been improving since the late 2012s.

For the past year, from May 21, 2020 to May 17, 2021, the Nikkei Index price has been trending upwards. During this period, it rose from 19,259.52 points to 28,317.83 points, an increase of 47.02% in 52 weeks.

How can you follow the Nikkei 225 Index?

You can follow the evolution of the Nikkei price from the trading platform of your online broker. You can also check out the various websites that specialize in the stock market. The Nihon Keizai Shimbun website also offers up-to-date information on the Nikkei, but the content is in Japanese.

Factors influencing Nikkei 225 Index value

The Nikkei 225 is one of the most volatile stock market indexes. It can fall or rebound sharply under the influence of the following factors:

  • Currency prices involving the Yen: there is an inversely correlated relationship between the Yen and the Nikkei. This is because Japan's economy relies heavily on exports from its largest companies. The weakness of the Japanese currency favors foreign demand (especially American) and boosts the sale of these companies. This can cause the Nikkei to rise. On the other hand, a strong yen makes Japanese companies lose their international competitiveness and causes their shares to fall.
  • Global events: the Nikkei is also very sensitive to various events affecting the world, such as health crises, geopolitical tensions, and economic and financial crises. Particular mention should be made of the natural disasters to which Japan is highly exposed.
  • The domestic economy: one should also keep an eye on economic indicators such as GDP figures and the unemployment rate. The Nikkei is very sensitive to economic conditions in Japan and the United States, a country with which it has a close trading relationship.

Investing in the Nikkei 225 in 2021

What type of investment should I choose ?

  • Individual stocks

You can invest in Nikkei by buying each of the 225 stocks that make it up. However, this is a prohibitively expensive process, because you have to buy each stock in separate trades, which is expensive in terms of transaction costs. You'll also waste a lot of time valuing each share.

  • Exchange-traded funds

The best solution is to invest in the Nikkei 225 via exchange-traded funds (ETFs or a tracker). These are traded during market hours and are subject to price fluctuations like stocks. Investors can use ETFs for speculative trading (margin trading, short selling). The US, France and other EU countries such as Italy and Germany have ETFs that track the Nikkei 225.

Why invest in the Nikkei 225 in 2021?

Our information is only indicative, and your investment decision depends on your goals. Having said that, buying a stock index allows you to diversify your investment portfolio. In the case of the Nikkei 225, diversification is also geographical for a European investor who wants to speculate on the Asian market.

In your approach, take into account the upward trend of the index price, which is often favorable to buying. A downward trend, on the other hand, should prompt you to sell your assets. Also keep in mind that the Nikkei is very volatile.

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