Investors holding Japan exchange traded funds were likely pleased with the performances those funds delivered in 2013.
The db X-trackers MSCI Japan Hedged Equity Fund (NYSEArca: DBJP) and the rival WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) were among the top-performing single-country ETFs, buoyed in large part by the tumbling yen. The iShares MSCI Japan ETF (NYSEArca: EWJ), which does not feature a currency hedge, jumped 26% and vied with DXJ among the top asset-gathering ETFs of the year. [Slumping Yen a Boon for Japan ETFs]
When the U.S. Dollar has jumped above 100 against the Japanese yen for the first time since September in mid-November, speculation started increasing that the Nikkei 225 and Japan ETFs were on the brink of significant technical breakouts. At the time, it was noted that a longer-term chart showed the Nikkei 225 was recently rebuffed at a key resistance area and that Japan’s benchmark index has been making a series of lower highs dating back to the early 1990s. [The Japan ETF Breakout Everyone is Waiting For]
That breakout could be materializing. Chris Kimble of Kimble Charting Solutions notes the benchmark Nikkei 225 recently broke above a long-term downtrend line that had been acting as resistance dating back to the early 1990s.
It has “been a long time since the Nikkei 225 index broke above this resistance line, make that a couple of decades (20 Years)! Time and time again the Nikkei has created lower highs, failing to get above this falling resistance line until recently,” said Kimble.
Ongoing weakness in the yen has jolted DBJP and DXJ over the past three months. Even with Thursday’s losses, DBJP is up about 9.2% over that time while DXJ has added 6.4%.
The WisdomTree Japan Hedged Small Cap Fund (NasdaqGS: DXJS), which debuted in late June 2013 as DXJ’s small-cap equivalent, is up 7% over the past three months. That ETF already has $48 million in assets. In local currency terms, Japanese stocks surged 56.7% last year, making Japan the best-performing developed market in the world, according to Bespoke Investment Group.
WisdomTree Japan Hedged Equity Fund
ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of DXJ.