TOPIX underwent a major reshuffle on 30 October, with the weights of 683 transition-measure constituents set to be reduced by 12.5% of their original weights each quarter through July 2028. Free-float market capitalisation and trading-value turnover are the exclusion criteria, and mechanically driven selling is expected to continue regardless of earnings performance.
In the TOPIX constituent changes announced on 30 October, 35 stocks, including 日本マクドナルドホールディングス and セリア, were newly added, while 683 stocks were designated as transition-measure constituents. The weights of the transition-measure constituents will be reduced by 12.5% of their current weights each quarter through July 2028, and the impact of index-tracking funds is expected to continue over the long term.
The exclusion criteria are limited to free-float market capitalisation and annual trading-value turnover, measures of size and trading activity, with no consideration given to profit growth or earnings power. The benchmark for free-float market capitalisation is said to be approximately ¥40 billion, meaning companies with large cross-holdings by founding families or business partners, as well as companies with less active trading, may be affected. The 683 stocks include companies that have posted record-high profits, increased dividends or bought back shares.
This article selected 20 stocks from among the transition-measure constituents after confirming indicators such as record-high profits, substantial profit growth and upward earnings revisions in their latest results, and finding their PERs, PBRs and dividend yields to be at undervalued levels. Each company’s earnings reports and timely disclosures were reviewed, and stocks for which a tender offer or delisting has been decided were excluded.
The selected stocks include 新日本建設, Ｅ・Ｊホールディングス, 日本マクドナルドホールディングス and セリア. In particular, 新日本建設 has posted record-high profits for 6 consecutive fiscal years and plans substantial profit growth in the fiscal year ending March 2027, while its share price remains low. Ｅ・Ｊホールディングス is expected to increase its dividend for the 9th consecutive fiscal year and is expected to grow earnings on demand related to infrastructure.
At the next reassessment in October 2027, the reduction in weights may be halted if the stocks meet the trading-value turnover threshold and continue to satisfy the retention criteria. Attention is also focusing on developments at companies seeking to remain in TOPIX.