ETF Trends
ETF Trends

It’s not often a single developed country ETF displays the short term volatility of a small cap stock, but such is the case lately in Japan. With a quick glance at EWJ (iShares MSCI Japan, Expense Ratio 0.48%) we see a sudden and sharp run-up amid announcements and purchases of Japanese based stocks, presumably via ETFs by the BOJ as well as Japan’s pension fund, and now a sharp regression right back to its 200day moving average on larger than usual trading volume.

This is not healthy action in a developed economy and it may be a sign that some central bank tinkering in equity markets is starting to unhinge. EWJ has had notable inflows lately, with more than $550 million entering the
fund and it remains the largest Japan focused equity ETF in the U.S. landscape with about $14.5 billion in assets under management.

DXJ (WisdomTree Japan Hedged Equity Fund, Expense Ratio 0.48%) has also made some noise recently in pulling in nearly $400 million in new assets on increased interest in buying Japan ETFs. DXJ’s regression from its recent highs has not been nearly as painful as that of EWJ.

Volatility in Japanese based equities should continue for the foreseeable future given the announced presence of not only the BOJ but a very large pension fund upping their equity allocations to make open market ETF purchases.

For issuers of ETFs, this is clearly a positive as far as being an asset gathering environment. Other funds in this space to be conscious of include the $584 million DBJP (Deutsche MSCI Japan Hedged Equity, Expense Ratio 0.45%), as well as smaller funds in the space like DFJ (WisdomTree Japan SmallCap Dividend, Expense Ratio 0.58%), SCJ (iShares MSCI Japan Small Cap, Expense Ratio 0.48%), HEWJ (iShares Currency Hedged MSCI Japan, Expense Ratio 0.48%) and NKY (MAXIS Nikkei 225 Index, Expense Ratio 0.50%) to name several options.

There are another dozen funds in this space as well, many of them incorporating Currency (Yen) hedging in their equity exposure from WisdomTree, but many of these funds are rather new to market and still have lower asset levels. JPNL (Direxion Daily Japan Bull, Expense Ratio 0.95%) has seen a spike in trading interest lately as one might expect as have EWV (ProShares UltraShort MSCI Japan, Expense Ratio 0.95%) and EZJ (ProShares Ultra MSCI Japan, Expense Ratio 0.95%), and for those that are like us and believe volatility is here to stay in Japan in the near term, these three funds make sense to have on your daily radar.

iShares MSCI Japan ETF

For more information on Street One ETF research and ETF trade execution/liquidity services, contact Paul Weisbruch at pweisbruch@streetonefinancial.com

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