Japanese firms that chose stock splits are outperforming the market

Japanese companies that conducted stock splits recently have seen their shares outperform the market, showing one reason why investors can’t get enough of those equities.

More than 80 Japanese firms including chip device maker Rohm Co. and Shin-Etsu Chemical Co. have announced stock splits so far in 2023, almost double the pace of a year earlier and the most for the period in five years, according to data compiled by Bloomberg.

While dividing up equity into more shares shouldn’t affect its total value, the move lowers the price per stock, making it more affordable for less cash-rich investors to buy. The added demand often boosts the share price as well, offering investors further incentives to put their money in the split equities.

In fact, more than half of Japanese companies conducting stock splits this year have outperformed the Topix index a month after announcing the move, according to Bloomberg calculations. Moreover, the divided shares tended to have sharper price moves than the market benchmark, and they beat the Topix by about 5 percentage points on average a month after disclosing the step. ...continue reading