Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Play the Japan Rally With These ETFs


Investors have bought into the notion that newly elected Prime Minister Shinzo Abe could actually prove successful in weakening the yen.


Editor's Note: This content was originally published on by The ETF Professor, Benzinga Staff Writer.

The Nikkei 225 (INDEXNIKKEI:NI225), Japan's benchmark equity index, has surged almost 9% in the past month as investors have bought into the notion that newly elected Prime Minister Shinzo Abe could actually prove successful in weakening the yen.

The yen, already on pace to be the worst-performing developed market currency in the world this year, is hovering near 21-month lows against the dollar and multi-month lows against the euro, Australian dollar, and other major currencies as Abe continues to sharpen his currency-weakening rhetoric. A cornerstone of his campaign, Abe has demanded that the Bank of Japan engage in unlimited monetary easing and target inflation of 2%, which is double the central bank's current goal.

Showing he is not one to pull any punches, Abe has said that if BoJ does not get in line with his easing and inflation demands, he will work to revoke a Japanese law guaranteeing the central bank's independence. Abe has also threatened to remove BoJ governors that do not see things his way.

The headlines are a welcome respite from nearly two decades of spiraling equity prices, deflation, rising deficits, and assorted other black marks that have plagued Japan, the world's third-largest economy. Since its debut in April 1996, the iShares MSCI Japan Index Fund (NYSEARCA:EWJ) has lost almost 41%, painting the picture of just how perilous investing in Japan has been.

With that type of savage decline in mind, it is understandable that some investors will take a "show me" attitude when it comes to Japan. It is logical to ask how and why things will be different under Abe this time around (this is his second go round as Japan's prime minister). Assuming Abe is successful in restoring lost glory to Japan's economy, these are the ETFs with which to play that theme.

Precidian MAXIS Nikkei 225 Index ETF (NYSEARCA:NKY): Most ETF industry observers would say it is hard for a firm to be successful with just one fund on the market, but the MAXIS Nikkei 225 Index ETF has proven to be a success for Precidian as the fund just crossed the $200 million in assets under management mark.

NKY is an easy to comprehend ETF. What this fund amounts to is a tracking ETF for the Nikkei 225. That means with a 24.4% weight to industrial firms and a 15.4% allocation to technology companies, NKY is heavily exposed to Japanese exporters. Should Abe's yen-weakening efforts prove fruitful, NKY will be one of the more desirable destinations among Japan ETFs.

Investors should note that NKY is not perfect in terms of tracking the Nikkei 225. For example, since Abe won on December 16, the Nikkei 225 is up about 4.1% while NKY has added about 2.5%. On the other hand, it is worth noting that NKY has gained 11.3% in the past year compared to an 8.5% jump for EWJ.

< Previous
No positions in stocks mentioned.

The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.

Featured Videos