Understanding the Japanese Stock Market: Insights for Vietnamese Investors

The Japan Stock market contributes significantly to the global stock market with a value of $6,718.22 billion, notably above the global world average of $1,372.12 as of 2020. Founded in 1878, it includes some of the biggest companies in the world like Sony, Nintendo and more. 

This article aims to provide Vietnamese investors with valuable insights into the Japanese stock market.

Overview of the Japanese Stock Market

Japanese stocks are primarily traded on the Tokyo Stock Exchange (TSE), which is the largest stock exchange in Japan and a part of the Japan Exchange Group (JPX). The JPX has approximately 1,835 prime and 1,443 standard stocks listed on the exchange as of May 2023. 

There are four main subsidiaries of the Japan exchange group:

Tokyo Stock Exchange (TSE): The Tokyo Stock Exchange is the primary stock exchange in Japan, where the majority of Japanese stocks are traded. It provides a platform for the listing, trading, and clearing of equities, bonds, and other securities.

Osaka Exchange (OSE): Facilitates the trading of derivatives, including futures and options, as well as equity products.

Japan Securities Clearing Corporation (JSCC): A central counterparty clearinghouse for financial instruments traded on the Tokyo Stock Exchange and Osaka Exchange, ensures efficient clearing and settlement of transactions in Japanese financial markets.

Japan Exchange Regulation (JPX-R): JPX-R is a subsidiary that oversees and regulates the operations of the Tokyo Stock Exchange and the Osaka Exchange. 

Overview of the Tokyo Stock Exchange 

The Tokyo Stock Exchange (TSE) is Japan’s main stock exchange located in Tokyo. The TSE dates back to 1878 and has played a significant role in Japan's economic growth and development. Preferred by both domestic and international investors the TSE is known for its diverse range of listed companies, including prominent Japanese corporations across various industries like technology, retail, pharmaceuticals and more.

The Japanese Stock Market Index: Nikkei 225

The Nikkei 225 is Japan's prominent stock index tracking 225 large corporations from diverse industries. Established in May 1950, it represents an average of the share prices of its constituent companies as a price-weighted index. It has already shown a positive change of 18.64% in its value in 2023 and a 230% increase in the last ten years.

The Nikkei ranks companies based on their stock price. Prominent companies like Sony Corp., Canon, and Toyota Motor Corp. are included in the Nikkei 225 index.

Traders can trade the Nikkei 225 index and its constituent companies during specific trading hours (9:00 to 11:30 and 12:30 to 15:00 GMT +09:00). Additionally, they have the flexibility to trade the index through CFDs and futures. This allows traders to trade Nikkei 225 even when the TSE is closed, providing more opportunities to participate in the market.

Top ways to invest in the Japanese stock market 

1. Stocks/indices

Whether one is a Japanese or Vietnamese investor, there are multiple ways of buying stocks in Japanese companies. Traders can utilize traditional stock brokers or leverage online trading platforms to access the Japanese stock market. For foreign investors specifically, international brokerages often offer Japanese equities, enabling them to buy stocks directly.

Investing in Japanese indices, such as the Nikkei 225, provides investors a diversified portfolio of stocks. This approach allows investors to tap into the potential of the Japanese economy and gain broad market exposure in a single investment.

2. Contract for Differences (CFDs)

Alternatively, traders have the option to utilize CFDs to gain exposure to Japanese stocks and indices. CFDs are derivative contracts between traders and brokers who aim to benefit from the price difference between the trade's opening and closing prices. When trading CFDs, traders  speculate on the movements of share prices, both long and short, without actually owning the underlying stocks or indices. 

For example, let's assume a Nikkei 225 CFD is offered at a 5% margin and 10:1 leverage. This means that traders can enter a Nikkei 225 position worth $10 with only $1. To keep a leveraged trade active, traders must maintain a minimum amount of money in their account, known as the maintenance margin, which is equal to a percentage of the total trade value.

*This is an example only to enhance a consumer's understanding of the above note and is not to be taken as Blueberry. providing personal advice.

3. Exchange Traded Funds (ETFs)

Passive investors can opt to purchase exchange-traded funds (ETFs) or mutual funds that offer exposure to Japanese companies, such as those tracking the Nikkei 225 Index.

ETFs are traded on stock exchanges just like individual stocks, providing investors with the ability to trade shares throughout the trading day. However, ETFs are different from both stocks and CFDs. 

• Stocks represent ownership in a company, while ETFs are bundles of various assets like stocks, bonds, and more. ETFs can contain multiple stocks or other securities, offering diversification in a single investment.
• CFDs (Contract for Difference) are traded on margin, allowing traders to trade with a fraction of the full value of the position. In contrast, ETFs are not necessarily traded on margin and traded on exchanges similar to stocks.

By owning shares of an ETF, investors are entitled to receive dividends and capital gains that are proportional to the number of shares they hold within the fund. This allows investors to participate in the performance of a diversified portfolio of Japanese companies without having to directly manage individual stocks.

Invest in the Japanese Stock Markets through CFDs

Understanding the Japanese stock market provides valuable insights for Vietnamese investors seeking investment opportunities in Japan. By familiarizing themselves with the market structure, trading hours, and investment options, Vietnamese investors can actively participate in the Japanese stock market and potentially benefit from its growth and performance.