In order to raise funds for dividend payments, Japanese stock ETFs usually conduct a concentrated selling action on the settlement day in July. With the recent rise in Japanese stock prices and the increasingly generous dividend policies for investors, the scale of selling has continued to reach new highs. Generally speaking, this type of sale will not have any impact on the trend of Japanese stocks.
As the Japanese stock market emerges from years of Buffett bull, foreign investors are increasingly paying attention to Japanese stocks. However, for investors who are preparing to invest in Japanese stocks, especially those who are preparing to buy index funds in the next few days, the Japanese market will welcome a relatively special time node next week.
According to the expectations of Daiwa Securities and Nomura Securities, during the closing stage of next Monday (July 8) and next Wednesday (July 10), the main ETFs tracking the Nikkei and TOPIX indices will carry out concentrated selling operations of stocks and futures worth nearly 1.2-1.3 trillion yen (about RMB 54-58 billion).
For investors in Japanese stock ETFs, this is also a common situation. In order to raise funds for cash dividends to shareholders, these Japanese stock index ETFs need to conduct a wave of concentrated holding and selling. Takehiko Masuzawa, stock trading director of Hui Li Securities (Japan), explained: "The sales operation will be carried out at the end of the trading on the 8th and 10th to avoid the fund deviating from the index. These two days are also the settlement day of the ETF."
Such ETFs usually set dividend payments in July, as Japanese listed companies usually hold shareholder meetings in May and June, during which the amount of dividends is determined. To ensure linkage with the index, the fund will also purchase futures of the same scale.
In recent years, there has also been a new situation: with the Tokyo Stock Exchange holding the banner of "re-evaluating Japan", the generosity of listed companies in returning to investors is increasing. Junichi Hashimoto, chief quantitative analyst at Daiwa Securities, said that due to the increase in the amount of dividends paid by the company, thanks to the more generous return to shareholders and the rise in stock prices, the dividend payments of ETFs have also increased.
Therefore, the sale of stock index ETFs related to the dividend is increasing every year. According to preliminary expectations, this year's sales will increase by 8% compared to 2023, reaching a new height.
Market analysts also believe that although there may be some short-term fluctuations caused by this "routine operation", the event itself will not change the market trend. The recent consecutive highs of the TOPIX and Nikkei 225 indices are the best explanation.
(Nikkei 225 monthly chart, source: TradingView)
Of course, investors who know that these index ETFs have plans to sell may be influenced in their short-term buying intentions. However, from the perspective of the entire market, the common view is that this type of sale is unlikely to cause a significant downturn in the stock market.
According to multiple market observers, hedge funds and other institutional investors have already set short positions in the futures market in advance to cope with the selling of ETFs in these two days. When these investors buy back the futures contracts they sold earlier, these buy orders will offset the sell orders related to the ETFs.