The equities market and stock exchange traded funds retreated in a violent start to a new year. As volatility dissipates, exchange traded fund investors should consider areas where selling may have been overdone.
“In our opinion, much of the recent selling has been overdone and, as such, has created some bargains,” Russ Koesterich, Global Chief Investment Strategist and Head of the Model Portfolio & Solutions Business at BlackRock, said.
For instance, investors may take a look at the developed Japan where fears of a hard landing in China pressured Asian markets and briefly sent Japanese equities into a bear market.
“Despite the recent volatility, we remain constructive on Japanese equities, particularly as the latest selloff has returned some value to that market,” Koestrich said.
Investors can use the iShares MSCI Japan ETF (NYSEArca: EWJ) to track Japaneses markets. EWJ is trading at a 15.0 price-to-earnings ratio, compared to the S&P 500 Index’s 17.2 P/E.
However, with speculation of increased central bank intervention to lift the flagging economy, investors may be exposed to currency risks. Consequently, people may consider currency hedged ETFs, which diminished the negative effect of a weaker yen currency or stronger U.S. dollar. Currency-hedged Japan ETF options include the WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ), iShares Currency Hedged MSCI Japan ETF (NYSEArca: HEWJ) and Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEArca: DBJP).