Japanese stocks and exchange traded funds reached new highs Friday, hitting a double bingo, as the world’s largest pension fund shifts into Japanese equities and the Bank of japan unexpectedly increased monetary stimulus.
Japan hedged-equity strategies, which hedge against a depreciating currency, were leading the charge Friday and were all trading at all-time highs as the BOJ’s aggressive policy helped push the yen to a six-year low. On Friday, The WisdomTree Japan Hedged Small Cap Fund (NasdaqGM: DXJS) jumped 6.8%, WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) increased 6.6% and the Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEArca: DBJP) surged 7.2%. [Japan ETFs for the Contrarian Investor]
Meanwhile, non-hedged equity iShares MSCI Japan ETF (NYSEArca: EWJ) was 4.7% higher and iShares MSCI Japan Small-Cap ETF (NYSEArca: SCJ) was up 4.0% Friday.
The CurrencyShares Japanese Yen Trust (NYSEArca: FXY) declined 2.5% Friday. In contrast, the ProShares UltraShort Yen (NYSEArca: YCS), which tries to reflect the daily -2x or -200% daily return of the USD/JPY currency pair, jumped 4.8% Friday. [Japan ETFs Face Some Weak Yen Risks]
Sector-specific hedged-equity ETFs showed significant gains as well, with the WisdomTree Japan Hedged Financials Fund (NYSEArca: DXJF) up 9.8% and Japan Hedged Real Estate Fund (NYSEArca: DXJR) up 11.9% and WisdomTree Japan Hedged Health Care Fund (NYSEArca: DXJH) advancing 7.5%.
The Japanese equities markets were rallying after Japan’s Government Pension Investment Fund, which holds about $1.1 trillion in assets under management, increased its allocation to Japanese and overseas equities to 25% each, up from 12% each, and cut down its domestic bond allocations to 35% from 60%, Wall Street Journal reports.
“It is very surprising,” Robert Waldner, chief fixed income strategist at Invesco Ltd., said in the WSJ article. “Most global pension funds are paring back risk at this point, not adding risk.”
Moreover, the BOJ unexpectedly boosted its annual target for expanding the monetary base to 80 trillion yen, or $724 billion, from 60 to 70 trillion yen, Bloomberg reports.
“The BOJ and GPIF announcements are delivering a double punch to push up stocks,” Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd., said in a Bloomberg article. “The BOJ came as a total surprise with almost nobody expecting action today.”
Deutsche X-trackers MSCI Japan Hedged Equity ETF
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