Mid-term elections in Japan are presenting opportunity with ETFs, such as the Deutsche X-trackers MSCI Japan Hedged Equity ETF (NYSEArca: DBJP).
Leading up to Sunday’s election, Japanese companies preferred to see Prime Minister Shinzo Abe’s party retain power. Abe’s Liberal Democratic Party-led (LDP) coalition won a combined 312 seats, keeping its two thirds “super majority” in the 465-member lower house, local media said.
“Many companies in the survey expressed concern that a big election win would encourage Abe to invest his energy in a long-held ambition to revise Japan’s pacifist constitution, at the expense of economic policy,” according to Reuters.
DBJP, home to nearly $1.7 billion in assets under management, “seeks investment results that correspond generally to the performance, before fees and expenses, of the MSCI Japan US Dollar Hedged Index. The index is designed to provide exposure to Japanese equity markets, while at the same time mitigating exposure to fluctuations between the value of the U.S. dollar and Japanese yen,” according to Deutsche Asset Management.
The ETF holds 323 stocks. DBJP allocates about 40% of its combined weight to the industrial and consumer discretionary sectors.
DBJP has delivered a solid performance even in the face of the U.S. dollar slumping and the yen being solid. Japanese stocks are usually adversely affected by a stronger yen due to the economy’s high dependence on exports. Importantly, Japanese stocks are attractively valued relative to other developed markets.