Investors are adding on Japan hedged-equity exchange traded fund positions as a weaker yen currency helps energize the economy and more companies begin returning value back to investors.
Since the start of May, the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) has attracted $68.3 million in net assets, iShares Currency Hedged MSCI Japan ETF (NYSEArca: HEWJ) saw $95.6 million in new inflows, Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEArca: DBJP) experienced $93.3 in inflows and WisdomTree Japan Hedged Small Cap Fund (NasdaqGM: DXJS) added $10.4 million, according to ETF.com.
Meanwhile, flows into Japanese equity funds hit their highest level since the second quarter of last year, reports Roger Blitz for the Financial Times.
Investors were “attracted by the clarity of [Japan’s] current economic policies and the valuations of Japanese stocks,” according to EPFR Global.
The Bank of Japan’s loose monetary policy is performing as intended, with governor Haruhiko Kuroda stating that the economy is growing and inflation is inching higher. Consequently, the BOJ may hold off on further monetary easing. [Aggressive Easing Sustains Japan ETFs]
“I therefore don’t think additional monetary easing is necessary at this stage,” Kuroda said.
The non-hedged iShares MSCI Japan ETF (NYSEArca: EWJ) brought in $240.2 million in inflows so far this month, which suggests that some traders believe that the Japanese yen, which has remained relatively flat against the U.S. dollar this year, may not see significant weakness ahead.
The CurrencyShares Japanese Yen Trust (NYSEArca: FXY), which tracks yen movements against the dollar, has gained 0.4% year-to-date. The Japanese yen currency now trades at about 119.35 per dollar.
Moreover, Japanese equities are strengthening as companies including Dentsu Inc., Dai Nippon Printing Co. and Marui Group Co. plan to repurchase shares, Bloomberg reports. [A Good Year for Japan ETFs]
“Companies giving back to shareholders through moves like share buybacks and boosting dividends has increased,” Soichiro Monji, chief strategist at Daiwa SB Investments Ltd, said in the article. “That’s supportive for the market.”
For more information on the Japanese market, visit our Japan category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.