The MSCI Asia Pacific Index is trading at its highest level in 17 months with a rally in Japan’s stock market on a weaker yen supplying much of the pop.
The benchmark is headed for its highest close since August 2011 on speculation the Federal Reserve will renew its commitment to asset purchases, Bloomberg reports.
“The pain trade is fear that you are going to miss out on the rally,” said Bob Van Munster, head of Australian equities at Tyndall Investment Management Ltd. in Sydney, in the article. “We have low interest rates and economic tail risks that are abating. As fear continues to diminish there will be a rotation into risk assets.”
Vanguard MSCI Pacific ETF (NYSEArca: VPL) is up about 10% the past three months.
As of Dec. 31, the top country allocations in the ETF were Japan at 58.7%, Australia at 26.2%, Hong Kong at 9.2% and Singapore at 5.5%, according to Vanguard.
Japan stock ETFs such as iShares MSCI Japan (NYSEArca: EWJ) have surged recently in the wake of the election of Prime Minister Shinzo Abe, who has pledged to pressure the Bank of Japan to launch unlimited quantitative easing to assist the economy.