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Capitalize on Japan's Bullish Outlook With These ETFs
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Japanese securities have been gaining momentum lately, approaching their 33-year high. Increased foreign inflow helped by improved corporate earnings and reforms in corporate governance, has played a significant role in the uptrend of the securities.
According to the Wall Street Journal, as quoted on MSN, Warren Buffett’s Berkshire Hathaway’s strategy to invest heavily in Japanese stocks is another reason that has paved the way for the recent bullish outlook in the country’s securities.
These factors have led the Nikkei 225 Index to surge about 29.92% year to date, higher than the S&P 500, which has gained about 19.02%. However, factoring in the 11% decline in the Yen, Japanese stocks have underperformed slightly compared to U.S. stocks when measured in dollar terms.
More on Berkshire Hathaway’s Japan Optimism
Berkshire Hathaway, recently secured approximately $827 million through bonds denominated in Japanese Yen, generating speculation of further investment in the country.
According to Charlie Munger, Berkshire Hathaway Incorporation’s vice chairman, as quoted on Yahoo Finance, the prevailing low-interest-rate setting in Japan stands as a significant contributing factor toward the company’s growing investments in the country. Munger emphasized that the Japanese investment presented an exceptional and profitable opportunity, which couldn't be overlooked or disregarded.
Initially announcing an investment of $6 billion across five Japanese trading houses in August 2020, the investment has significantly increased in value and is currently estimated at around $17 billion.
Optimistic Outlook on Japanese Indexes
According to analyst estimates in a Reuters poll, Japan’s Nikkei 225 is estimated to reach a level of 35,000 by June end of next year, hitting its three-decade high driven by a robust earnings season.
Per Goldman Sachs, the Japanese equity market is forecasted to experience another upsurge in 2024, driven by robust worldwide economic expansion and reforms within the stock market. TOPIX, tracking all domestic companies of the Tokyo exchange's prime market division, is estimated to surge by 13%, reaching levels of 2650 by the end of 2024.
According to Goldman Sachs, the Tokyo Stock Exchange’s corporate governance reforms are deemed pivotal in driving the Japanese equity market. These reforms incentivize listed companies to enhance their valuations and profits, potentially leading to delisting if they fail to utilize capital effectively, with investors viewing it as a sign of improved corporate governance.
Japan’s Inflation Comeback to Reshape Investment Strategies
Japan’s economy is experiencing inflationary pressures after decades of declining prices. According to Reuters, this development is compelling investors to profoundly reconsider their strategies concerning Japan, coinciding with the Bank of Japan's contemplation of a significant policy shift.
Anticipated increases in interest rates, greater dividend yields and a resurgence in consumer expenditure are resulting in investors turning away from stocks that gained from Japan's aging demographic or a depreciating yen.
Shifting away from its negative interest rate policy, a hike in interest rate by BOJ will result in rise in lending margins, proving to be a tailwind for bank securities. As per Junichi Inoue, head of Japanese equities at Janus Henderson, the focus was on consumer businesses possessing the ability to raise revenues and profits by passing on increased energy and food costs to customers, leveraging their pricing power.
According to David Hogarty, senior portfolio manager at Dublin-based KBI Global Investors, as quoted on Reuters, increased inflation would compel companies to elevate their dividend distributions, proving to be beneficial for investors during inflationary times.
ETFs in Focus
Warren Buffett’s Berkshire Hathaway’s increasing investments in Japan and optimistic estimates for the country’s indexes improve its prospects. Investors wanting to robust on the optimistic outlook of the Japanese economy can look into the below-mentioned ETFs.
iShares MSCI Japan ETF seeks to track the performance of the MSCI Japan Index with a basket of 236 securities. The fund has gathered an asset base of $13.04 billion and charges an annual fee of 0.50%.
iShares MSCI Japan ETF has major allocations to the industrial (22.14%), consumer discretionary (19.06%) and information technology (14.32%) sectors. The fund has 79.19% exposure to large-cap securities and has gained 7.28% over the past month. EWJ has added about 15.82% year to date.
JPMorgan BetaBuilders Japan ETF seeks to track the performance of the Morningstar Japan Target Market Exposure Index with a basket of 265 securities. The fund has amassed an asset base of $9.44 billion and charges an annual fee of 0.19%.
JPMorgan BetaBuilders Japan ETF has a double-digit allocation to industrial and consumer discretionary sectors, with a share of 24.5% and 23.6%, respectively. The fund has about 76.80% exposure to large-cap securities and has gained 7.24% over the past month. BBJP has added around 16.15% year to date.
WisdomTree Japan Hedged Equity Fund seeks to track the performance of the WisdomTree Japan Hedged Equity Index, which is designed to neutralize exposure to fluctuations in the Japanese Yen relative to the U.S. dollar. The fund tracks the index with a basket of 449 securities. The fund has gathered an asset base of $3.32 billion and charges an annual fee of 0.48%.
WisdomTree Japan Hedged Equity Fund has major allocations to the industrials (23.64%), consumer discretionary (19.67%) and financials (15.10%) sectors. The fund has 74.20% exposure to large-cap securities and has gained 7.11% over the past month. DXJ has added about 45.43% year to date, gaining from a depreciating Japanese Yen.
Franklin FTSE Japan ETF seeks to track the performance of the FTSE Japan RIC Capped Index with a basket of 513 securities. The fund has gathered an asset base of $1.69 billion and charges an annual fee of 0.09%.
Franklin FTSE Japan ETF has major allocations to industrials (22.29%), consumer discretionary (18.94%) and information technology (13.23%) sectors. The fund has 69.22% exposure to large-cap securities and has gained 7.28% over the past month. FLJP has added about 15.51% year to date.
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Capitalize on Japan's Bullish Outlook With These ETFs
Japanese securities have been gaining momentum lately, approaching their 33-year high. Increased foreign inflow helped by improved corporate earnings and reforms in corporate governance, has played a significant role in the uptrend of the securities.
According to the Wall Street Journal, as quoted on MSN, Warren Buffett’s Berkshire Hathaway’s strategy to invest heavily in Japanese stocks is another reason that has paved the way for the recent bullish outlook in the country’s securities.
These factors have led the Nikkei 225 Index to surge about 29.92% year to date, higher than the S&P 500, which has gained about 19.02%. However, factoring in the 11% decline in the Yen, Japanese stocks have underperformed slightly compared to U.S. stocks when measured in dollar terms.
More on Berkshire Hathaway’s Japan Optimism
Berkshire Hathaway, recently secured approximately $827 million through bonds denominated in Japanese Yen, generating speculation of further investment in the country.
According to Charlie Munger, Berkshire Hathaway Incorporation’s vice chairman, as quoted on Yahoo Finance, the prevailing low-interest-rate setting in Japan stands as a significant contributing factor toward the company’s growing investments in the country. Munger emphasized that the Japanese investment presented an exceptional and profitable opportunity, which couldn't be overlooked or disregarded.
Initially announcing an investment of $6 billion across five Japanese trading houses in August 2020, the investment has significantly increased in value and is currently estimated at around $17 billion.
Optimistic Outlook on Japanese Indexes
According to analyst estimates in a Reuters poll, Japan’s Nikkei 225 is estimated to reach a level of 35,000 by June end of next year, hitting its three-decade high driven by a robust earnings season.
Per Goldman Sachs, the Japanese equity market is forecasted to experience another upsurge in 2024, driven by robust worldwide economic expansion and reforms within the stock market. TOPIX, tracking all domestic companies of the Tokyo exchange's prime market division, is estimated to surge by 13%, reaching levels of 2650 by the end of 2024.
According to Goldman Sachs, the Tokyo Stock Exchange’s corporate governance reforms are deemed pivotal in driving the Japanese equity market. These reforms incentivize listed companies to enhance their valuations and profits, potentially leading to delisting if they fail to utilize capital effectively, with investors viewing it as a sign of improved corporate governance.
Japan’s Inflation Comeback to Reshape Investment Strategies
Japan’s economy is experiencing inflationary pressures after decades of declining prices. According to Reuters, this development is compelling investors to profoundly reconsider their strategies concerning Japan, coinciding with the Bank of Japan's contemplation of a significant policy shift.
Anticipated increases in interest rates, greater dividend yields and a resurgence in consumer expenditure are resulting in investors turning away from stocks that gained from Japan's aging demographic or a depreciating yen.
Shifting away from its negative interest rate policy, a hike in interest rate by BOJ will result in rise in lending margins, proving to be a tailwind for bank securities. As per Junichi Inoue, head of Japanese equities at Janus Henderson, the focus was on consumer businesses possessing the ability to raise revenues and profits by passing on increased energy and food costs to customers, leveraging their pricing power.
According to David Hogarty, senior portfolio manager at Dublin-based KBI Global Investors, as quoted on Reuters, increased inflation would compel companies to elevate their dividend distributions, proving to be beneficial for investors during inflationary times.
ETFs in Focus
Warren Buffett’s Berkshire Hathaway’s increasing investments in Japan and optimistic estimates for the country’s indexes improve its prospects. Investors wanting to robust on the optimistic outlook of the Japanese economy can look into the below-mentioned ETFs.
iShares MSCI Japan ETF (EWJ - Free Report)
iShares MSCI Japan ETF seeks to track the performance of the MSCI Japan Index with a basket of 236 securities. The fund has gathered an asset base of $13.04 billion and charges an annual fee of 0.50%.
iShares MSCI Japan ETF has major allocations to the industrial (22.14%), consumer discretionary (19.06%) and information technology (14.32%) sectors. The fund has 79.19% exposure to large-cap securities and has gained 7.28% over the past month. EWJ has added about 15.82% year to date.
JPMorgan BetaBuilders Japan ETF (BBJP - Free Report)
JPMorgan BetaBuilders Japan ETF seeks to track the performance of the Morningstar Japan Target Market Exposure Index with a basket of 265 securities. The fund has amassed an asset base of $9.44 billion and charges an annual fee of 0.19%.
JPMorgan BetaBuilders Japan ETF has a double-digit allocation to industrial and consumer discretionary sectors, with a share of 24.5% and 23.6%, respectively. The fund has about 76.80% exposure to large-cap securities and has gained 7.24% over the past month. BBJP has added around 16.15% year to date.
WisdomTree Japan Hedged Equity Fund (DXJ - Free Report)
WisdomTree Japan Hedged Equity Fund seeks to track the performance of the WisdomTree Japan Hedged Equity Index, which is designed to neutralize exposure to fluctuations in the Japanese Yen relative to the U.S. dollar. The fund tracks the index with a basket of 449 securities. The fund has gathered an asset base of $3.32 billion and charges an annual fee of 0.48%.
WisdomTree Japan Hedged Equity Fund has major allocations to the industrials (23.64%), consumer discretionary (19.67%) and financials (15.10%) sectors. The fund has 74.20% exposure to large-cap securities and has gained 7.11% over the past month. DXJ has added about 45.43% year to date, gaining from a depreciating Japanese Yen.
Franklin FTSE Japan ETF (FLJP - Free Report)
Franklin FTSE Japan ETF seeks to track the performance of the FTSE Japan RIC Capped Index with a basket of 513 securities. The fund has gathered an asset base of $1.69 billion and charges an annual fee of 0.09%.
Franklin FTSE Japan ETF has major allocations to industrials (22.29%), consumer discretionary (18.94%) and information technology (13.23%) sectors. The fund has 69.22% exposure to large-cap securities and has gained 7.28% over the past month. FLJP has added about 15.51% year to date.