TSE Cash Markets

The total market capitalization (dollar-denominated) of stocks listed on the Tokyo Stock Exchange surpassed that of China‘s Shanghai Stock Exchange, ranking fourth in the world. According to the World Federation of Exchanges (WFE), this is the first time since June 2020 that the Tokyo Stock Exchange has surpassed Shanghai‘s market capitalization. The power structure in the world market capitalization rankings has been reshuffled, with India‘s National Stock Exchange surpassing both China‘s Hong Kong and Shenzhen Exchanges.

According to WFE, as of the end of January, the market capitalization of stocks listed on the Tokyo Stock Exchange increased 3% from the end of 2023 to $6.34 trillion (about 951 trillion yen). It reversed Shanghai, which had declined 7% to $6.0433 trillion, to move into fourth place.

Looking at the period from the end of 2022 to the end of January of this year, Japan and India have noticeably increased in rank. The market capitalization of shares listed on the National Stock Exchange of India increased by 34%. It rose to 6th in the world, surpassing Hong Kong Exchanges and Clearing and Shenzhen Stock Exchange.

In the background is the shift of investment money from China. India‘s population is growing in contrast to China, whose population has begun to decline, and domestic demand is expected to grow due to the increase in the middle class. In Japan, there are growing expectations for corporate reforms, such as the Tokyo Stock Exchange‘s request for correction of companies with low P/B ratios (price-book value ratio), and for companies to get back on a growth track by overcoming deflation. Both are now more likely to direct funds from China.

Hirokazu Kabeya, equity research director at Daiwa Securities, says, “The Chinese economy is not likely to pick up anytime soon, and when they tried to temporarily withdraw their funds, they probably moved their money to Japan and India, which have unique growth factors that are less susceptible to a slowdown in the Chinese economy.”

China‘s exchanges are mirroring the sagging price movements of stock prices and dropping in the rankings. The Shanghai Stock Exchange, which was in third place at the end of 2022, lost 10% of its market capitalization and dropped to fifth place. The Hong Kong and Shenzhen exchanges also saw their market capitalization decline by about 20%.

Many believe that the shift of funds from China will continue for the foreseeable future. On 20th, it was reported that China would cut the base interest rate on mortgages, but the Shanghai market’s reaction was also limited, as the effect on a fundamental recovery of the real estate market was widely believed to be limited.

“They are concerned about the depreciation of the currency and see through the fact that they are unable to engage in monetary easing, which would be a full-fledged economic stimulus. The situation continues to be one in which a full-fledged recovery of the economy cannot be foreseen because of all the measures to change investors’ perspective,” noted Toru Nishihama, chief economist at the Dai-ichi Life Research Institute.

The ranking shows that TMX Group of Toronto, Canada, with its strong performance in mining and other stocks, outperformed the London Stock Exchange Group. London is struggling to compete with the euro zone and North American exchanges, with both the number of initial public offerings (IPOs) listed and the amount raised in 2023 sinking to their lowest levels since 2010.