Japan’s stock market and related exchange traded funds (ETFs) have fallen since disaster struck the country. With continued uncertainty in the country regarding the impact of the nuclear reactors, and prices as low as they are now, some are wondering if Japan, the world’s third largest economy, is a buying opportunity.
The Tokyo Stock Exchange dropped around 20% in the days following the earthquake and tsunami, and has come back since then; it’s down 7% since the quake. The government of Japan declared the event a “large-scale” disaster, which means the nation bears nearly 90% of the cost of restoration work such as of the roads and ports, reports The Yomiuri Shimbun. But the issue with the nuclear reactors could delay a big part of the reconstruction that needs to take place.
There is still uncertainty around the nuclear reactors and that has had a negative effect on the economy and stocks, reports Anna Kitanaka and Toshiro Hasegawa for Bloomberg. The country’s GDP may shrink by as much as 12% annualized in the second quarter. [Japan ETFs: Looking Forward To A Better Future.]
Brett Arends of The Wall Street Journal writes that the intrepid investor may want to consider blue chip equities, with manufacturing and technology sectors being on the list, but investors may want to avoid insurers and utilities. Additionally, small-cap stocks are even cheaper, with most trading on half book value, or less. Most Japanese corporations have spent years repairing their balance sheets and stocking up on cash, and most exporters have benefited from Chinese demand.
For those who are feeling bold, long Japan ETF options include:
- iShares MSCI Japan (NYSEArca: EWJ)
- WisdomTree Japan Small Cap Dividend (NYSEArca: DFJ)
- iShares S&P/TOPIX 150 (NYSEArca: ITF)
- SPDR Russell/Nomura Small Cap (NYSEArca: JSC)
- iShares MSCI Japan Small Cap (NYSEArca: SCJ)
- SPDR Russell/Nomura PRIME (NYSEArca: JPP)
- WisdomTree Japan Hedged Equity (NYSEArca: DXJ)
- ProShares Ultra MSCI Japan (NYSEArca: EZJ)
Japanese yen currency options include:
- CurrencyShares Japanese Yen Trust (NYSEArca: FXY)
- WisdomTree Dreyfus Japanese Yen (NYSEArca: JYF)
- iPath Yen/Dollar Exchange Rate ETN (NYSEArca: JYN)
- ProShares Ultra Yen (NYSEArca: YCL)
However, if you are still pessimistic about Japan’s markets, you may also take a look at short ETFs options. [Using ETFs To Hedge Against Japan’s Short-Term Volatility.]
For more information on Japan, visit our Japan category.
Read the disclaimer; Tom Lydon is a board member of Rydex|SGI.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.