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.
JPP employs what is known as a sampling strategy. That means the ETF is not home to every stock in its underlying index. In this case, JPP is home to 391 of its index's 1,000 components and its overall lineup is very similar to EWJ's.
Industrial and technology names combine for 34% of JPP's weight and Japanese auto giants Toyota (NYSE:TM), Mitsubishi, and Honda (NYSE:HMC) are JPP's top three holdings. Combine that with the fact that JPP does not offer a currency hedge and JPP is another fund could build on recent gains if Abe is successful in suppressing the yen's upside.
WisdomTree Japan Hedged Equity Fund (NYSEARCA:DXJ): Speaking of yen hedges, the WisdomTree Japan Hedged Equity Fund does offer a hedge on USD/JPY fluctuations, but that has not held the ETF as the yen has plunged in recent weeks. Quite the opposite is true as DXJ has surged 8.83% in the past month. Said another way, DXJ has outperformed the ProShares UltraShort Yen (NYSEARCA:YCS), a double-leveraged play on the yen against the dollar.
Earlier this month, DXJ's underlying index began employing a geographic filter designed to remove companies that derive the bulk of their revenue from Japan. Interestingly, DXJ was already on the move higher before that filter was introduced. Over the past 90 days, DXJ has jumped 14.5%.
To put that move into context, combing the returns offered by the major South Korea and Thailand ETFs over the same time horizon would still result in a number that lags DXJ's returns.
Bottom line: DXJ is attractive because Japanese firms that are heavily dependent on their home nation to drive top-line growth, particularly if they run capital-intensive businesses that used imported raw materials. A weaker yen is good Japan's exporters, not so much for the importers, and DXJ capitalizes on that theme.
Below, find some more great ETF and market content from Benzinga:
Is Apple's iPad, MacBook Air Behind the Death of the Notebook?
Rite Aid Shares Continue Earnings-Fueled Rally
Research In Motion Soars as Investors Ready for BlackBerry 10
Benzinga Pro covers this and all market news in real time. Get your free trial here.
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.
Daily Recap Newsletter