In the early stages of Japan’s calamity, market volatility could drag performance from Japanese assets. Investors can hedge their exposure to Japan’s markets with Japan -related exchange traded funds (ETFs) that implement short strategies.
Simply put, inverse, or short ETF, strategies go up when the underlying benchmark, in this case the Japanese market, go down. Currently available inverse Japan ETFs include:
ProShares UltraShort MSCI Japan (NYSEArca: EWV). EWV tries to reflect -200% returns of the MSCI Japan Index on a daily basis. The fund has an expense ratio of 0.95% and holds 340 companies. Sector weightings include: industrials 20%, consumer discretionary 19.01%, financials 17.71%, info tech 13.72%, materials 7.81%, health care 5.8%, utilities 5.36%, consumer staples 5.15%, telecom services 3.89% and energy 1.55%. EWV has crossed its 50-day moving average and is coming up to its 200-day moving average. [Japan Worries Impact ETFs.]
ProShares UltraShort Yen (NYSEArca: YCS). YCS tries to reflect the daily investment results that correspond to -200% of the U.S. dollar price of the yen. The fund has an expense ratio of 0.95%. The fund has been trailing around its 50-day moving average as more currency is being converted to yen to pay for the reconstruction effort.
It should be noted that these funds try to reflect the daily movement of the underlying index, so it is ill advised to hold the funds over the long-term.
Leveraged and inverse ETFs are funds that aim to magnify the daily moves of the market. In a short double-leveraged fund, if the index goes up, then the fund goes down twice that amount. In a long leveraged fund, if the index goes up, the fund doubles that. The same principle applies when you’re talking about triple-leveraged ETFs, too. [Special Report: Leveraged and Inverse ETFs.]
For more information on Japan, visit our Japan category.
Max Chen contributed to this article.