WisdomTree Japan Hedged Equity (NYSEArca: DXJ), the year’s top-selling ETF, has fallen nearly 20% from a multiyear peak with a recently strengthening yen providing an additional headwind.
The Japan fund has reeled in net inflows of more than $7.8 billion so far in 2013 as investors chase the Nikkei’s hot performance and the government’s plan to stimulate inflation.
DXJ traded as low as $44.34 a share on Monday, down about 18% from its recent high of $53.95. The ETF was off nearly 4% for the session in U.S. trading. [Japan ETFs Pare Losses on Public Pension Report]
The fund invests in Japanese stocks but hedges its currency exposure to the yen. Therefore, it will underperform non-hedged ETFs such as iShares MSCI Japan (NYSEArca: EWJ) when the yen is rising against the dollar, and vice versa.
“The selloff in Japan has grown so ugly, it’s on the verge of getting slapped with the ‘bear market’ label,” MarketWatch reports. “Traders typically view a 20% drop from a peak as a bear market.”
The Nikkei 225 fell to a six-week low Monday on weak China manufacturing data and speculation the Federal Reserve may slow down its bond purchases, BBC News reported.
“The fears of a slowdown in the global economy have given rise to an uncertainty about the demand for Japan’s exports, despite the weaker yen,” said Martin Schulz of the Fujitsu Research Institute, in the article. “At the same time, there are concerns whether the Bank of Japan’s policies will be enough to engineer a long-term sustainable recovery. That has put the brakes on the recent run seen in Japanese equities.”
WisdomTree Japan Hedged Equity