As Japan exchange-traded funds such as (EWJ) struggle to compete with the performance of countries like Singapore (EWS) and Hong Kong (EWH), its once dominant stock market also has lost tremendous ground to its rivals.
Tokyo still has the second-largest stock market after New York and is by far the largest financial centre in Asia, with a stock market capitalisation of $4,614bn compared with $1,715bn for Hong Kong and about $384bn for Singapore. The combined value of the Shanghai and Shenzhen markets have also recently exceeded that of Hong Kong. But even as other economies have seen their capital markets surge since 1990, such growth in Japan has been anaemic. Having comprised a third of global market capitalisation in 1990, Japan’s market capitalisation is now less than one-tenth that of the world’s $49,900bn.
Michiyo Nakamoto of the Financial Times goes on to say that in a stark sign of Tokyo’s decline, the number of foreign companies listed on the Tokyo Stock Exchange has plummeted from 125 in 1990 to just 25. That is a fraction of the 446 foreign listings in New York, the 315 in London and the 150 in Singapore. New funds and innovative products are also looking at other markets that are more open to growth.
As much as I want to believe that Japan and Japanese markets have turned the corner, all of this seems to highlight a lack of confidence and risk taking so vital to growth in financial services.
By Carl Delfeld of the Chartwell ETF Advisor
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