Softbank Group Corp founder Masayoshi Son has come to dominate Silicon Valley and his company is increasingly dominating the Japanese markets, with Softbank rising to become the largest-weighted stock on the country’s TOPIX index.
Softbank pulled ahead of Toyota Motor Corp on the benchmark gauge last week, and sat as the highest weighting, albeit by a fraction, when the market closed yesterday.
That has ended an almost 13-year streak for the automaker as the largest stock on the index, data compiled by Bloomberg showed.
The change is further evidence of Softbank’s winning run. While Toyota trades changed little this year, Softbank stock is up more than 30 percent, rallying past a two-decade-old record, backed by a surging stock market which has lifted the value of its portfolio companies.
Meanwhile, Toyota has been affected by production outages due to earthquakes in Japan and freezing temperatures in the US, concerns over the global semiconductor shortage, and fears that it might lose out in the red-hot electric vehicle market.
“It’s good news for the Japanese equity market, which has traditionally been dominated by manufacturers that have very low valuation,” Ichiyoshi Asset Management Co senior executive officer Mitsushige Akino said. “If Toyota continued to remain the top weight, then there’s a limit to how high the index can go. It’s a historic turning point.”
Shares of Softbank rose 2.1 percent yesterday, beating a 0.5 percent gain in the TOPIX gauge and a 0.6 percent advance in Toyota’s stock.
Another reason for Softbank’s dominance is the makeup of the TOPIX. The index is weighted by market value, where Toyota still dominates. However, that value is adjusted by a “free-float weight ratio,” based on the number of shares available to be traded in the market.
The opaque measurement ignores stock that is locked up by major shareholders, treasury stock or cross-shareholdings held by units or firms with business dealings.
A review in January trimmed Toyota’s ratio to 50 percent from more than 55 percent, with SMBC Nikko Securities Inc chief quantitative analyst Keiichi Ito saying that Toyota is affected by its vast series of cross-shareholdings.
Softbank has a ratio of 60 percent.
Softbank’s dominance in Japan’s markets is becoming more pronounced. It is the second-largest weighting on the Nikkei 225 after Fast Retailing Co, as well as the second-most valuable company in the country by market value.
“Changing times demand different companies,” Ito said.
With Toyota having lost its crown as the world’s most valuable automaker to Tesla Inc last year, it might soon discover that Softbank outranks it in Japan.
While Softbank’s market value trails Toyota’s ￥25.9 trillion (US$242 billion) valuation by about ￥4 trillion, that gap has in the past year narrowed by more than two-thirds.
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