WisdomTree developed five new Japan sector exchange-traded funds (ETFs) designed to be vehicles for investment themes stemming from Abenomics, depending on investors’ objectives. DXJT is designed to provide exposure to tech, media and telecom companies in Japan, while at the same time hedging the currency exposure. The Fund has more than 60% weight in the Information Technology sector and approximately 20% in both the Telecommunication Services and Consumer Discretionary sectors. Currently, the Fund’s top holding is SoftBank, with a weight of 9.99%14. With this large allocation to SoftBank and how much of its market cap is derived from Alibaba, some may want to look to DXJT as an indirect way to participate in the potential growth of Alibaba.
Abe’s Growth Strategies
I believe equity markets will remain supported as Abenomics continues to gain traction and especially as Japanese prime minister Shinzo Abe makes more progress on his growth strategy for Japan the third arrow of Abenomics. Abe is pursuing pro-business issues by arguing for a lower corporate tax rate and urging companies and investors to stay focused on generating profits. Technology companies should also receive a boost from new government initiatives supporting additional capital spending and tax policies encouraging business consolidation. DXJT, with the heavy weight to SoftBank, is even more in focus now with news of this latest IPO.
1New York Stock Exchange and the NASDAQ Global Market
2Amazon was a constituent of the WisdomTree Earnings 500 Fund (0.009%) and the WisdomTree Total Earnings Fund (0.002%) as of 5/1/14
3eBay was a constituent of the WisdomTree Earnings 500 Fund (0.27%) and the WisdomTree Total Earnings Fund (0.24%) as of 5/1/14
4Source: Alibaba Registration Statement
5SoftBank was also a constituent of the WisdomTree DEFA Fund (0.13%) and WisdomTree International LargeCap Dividend Fund (0.16%) as of 5/1/14
6Source: Bloomberg, 11/30/12–4/30/14
7Source: SoftBank earnings presentation, 5/7/14
8Reporting period 3/31/13–3/31/14
9Sources: WisdomTree, Bloomberg, 3/31/14
10The drop from the current ownership stake of approximately 34.4% to more than 30% is an estimate of the impact of dilution on SoftBank’s ownership stake. It is impossible to know with certainty how this picture will look after the IPO, but the point is that SoftBank is likely to remain a major stakeholder in Alibaba and is reasonable given public information up to 5/1/14
11Sprint was not a constituent of any WisdomTree Fund as of 5/1/14
12T-Mobile was a constituent of the WisdomTree Total Earnings Fund (0.018%) and the WisdomTree Earnings 500 Fund (0.005%) as of 5/1/14
13Masayoshi Son is founder and chief executive officer of SoftBank
14Source: WisdomTree, 5/1/14
Important Risks Related to this Article
Holdings subject to change. Current and future portfolio holdings are subject to risk. Foreign investing involves special risks, such as risk of loss from currency fluctuation or political or economic uncertainty. Funds focusing their investments on certain sectors increase their vulnerability to any single economic, regulatory or sector-specific development. This may result in greater share price volatility. The Fund focuses its investments in Japan, thereby increasing the impact of events and developments in Japan that can adversely affect performance.
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