Bargain hunters may be looking back into Japanese markets and Japan ETFs after the trade war speculation rocked global markets and fears begin to abate.
Currency-hedged Japan ETFs were among the best performers Tuesday as the U.S. Dollar strengthened 0.3% against the Japanese yen to ¥$105.7. The WisdomTree Japan Hedged Equity Fund (NYSEArca: DXJ) gained 1.7% and iShares Currency Hedged MSCI Japan ETF (NYSEArca: HEWJ) increased 1.9%.
Meanwhile, the unhedged iShares MSCI Japan ETF (NYSEArca: EWJ) was up 1.3% on Tuesday.
Related: ETF Investors May Want to Research Japan, Germany
Investors’ concern over a potential trade war between China and the U.S., the two largest economies in the world, waned on reports that Beijing and Washington D.C. have begun negotiating a resolution.
“I believe China and U.S. both have the intelligence to resolve the issue” through talks and business rules, Chinese Premier Li Keqiang told top U.S. and other foreign executives on the sidelines of the China Development Forum, MarketWatch reports.
Value Hunters Look to Japan
Meanwhile, hedge funders and institutional investors are beginning to look at Japan as a cheap play after the recent selling. Bullish traders argue that valuations in Japan are more attractive than in the U.S. as corporate profits improve, Bloomberg reports.
“If you went underweight Japan for the past 29 years, you would have done extremely well,” Belita Ong, chief executive officer of Dalton Investments, told Bloomberg. “Today, it trades at a remarkable discount.”
For example, EWJ, which tracks the MSCI Japan Index, shows a 14.1 price-to-earnings and a 1.3 price-to-book, compared to the S&P 500’s 17.4 P/E and 2.9 P/B.
Japanese markets were also strengthening on some political relief as testimony to Parliament about a cronyism scandal surrounding Japan’s premier produced damaging revelations. However, testimony revealed little that would harm Prmie Minister Shinzo Abe, Business Times reports.
“Share prices are rising partly because of investors’ relief that there was no surprise in the testimony,” Hiroaki Hiwata, strategist at Tokyo Securities, told AFP.
For more information the Japanese markets, visit our Japan Category.