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Under the Hood: Take the Asia, Leave the Japan


Evaluating Japanese ETFs.

Exotic fare does not account for much of AXJL's lineup. Combine Malaysia, Thailand, Indonesia, India, and the Philippines and the result is less than 19% of the fund's weight. Indian exposure in AXJL does not come by way of individual stocks, but through the iPATH MSCI India Index ETN (NYSEARCA:INP).

Financials and telecommunications dominate at the sector level, combing for almost 47% of the fund's weight. Regarding valuation, AXJL's index trades at about 13 times earnings and 1.7 times book value, two numbers that compare favorably with the older, larger iShares MSCI Pacific ex-Japan Index Fund (NYSE:EPP).

Given the recent market doldrums and the notion that US stocks are the best bet when it comes to developed market equities, AXJL requires some patience. The fund appears technically vulnerable and a drop below $63.75 could portend another $2 or more of downside.

That said, the ETF's combination of strong yield, ex-Japan developed markets exposure and a decent expense ratio make the fund a good idea for long-term, income investors. They can just wait for better pricing.

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

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