The Bernanke Effect on Japanese Stocks (EWJ)

The Nikkei finally rallied overnight in Japan but is still trading in the red on the year. Japanese stocks traded in the U.S. are having another rough day despite the turnaround in Tokyo. I've been wondering after all this selling where Japanese ETFs and ADRs were trading before Bernanke & Co raised rates on May 10th and where they stand now. It's not pretty!

Below is a list of every major Japanese ADR along with Japanese ETFs and CEFs. The first column of data represents year-to-date returns as of yesterday's close. The second column is the percentage change over the May 9th - May 23rd period. And lastly the third column is the percentage change between May 9th and when the Fed raised rates on the 10th. The data is sorted on the middle data column showing the hardest hit in the period since the Fed's decision and comments. I am not a total Fed basher. There certainly are other factors such as statements and decisions by the BoJ, earnings releases, and stock-specific issues such as divided payments.

At the time of posting a majority these are trading lower and some considerably lower. See a Yahoo! Finance summary at this link.

I would like to add that I remain bullish on Japan over the mid- and long-term. For the remainder of this year however, I see too much volatility and more trading opportunities with some potentially nice buy-and-hold chances on this sustained sell off. If the dollar continues gaining on the yen and Japanese ordinary shares don't rise by several percentage points, there is going to be more red as Japanese ETFs and ADRs will be negatively impacted. Depending on your outlook and strategy there are numerous ways to play Japan.

This morning I wrote (see full-text here):

A quick note here on Japanese equities. Until the Nikkei’s sudden reversal in afternoon trading earlier today in Tokyo, the situation for Japanese stocks was starting to get ugly with an 11.2% correction from the Nikkei’s April 7th multi-year high. In fact the Nikkei is still trading in the red for the year. Mentally this can be tough, especially with a long position. However, the consensus is that Japanese stocks will rebound and by now there are few out there that question the economy’s recovery. Even the Bank of Japan is beginning to use the term “expansion.” Lastly, according to Nikkei Shimbun data, the trailing-twelve-month P/E for N225 stocks is 20.38 and the forward P/E is 19.75. I can’t remember the last time I saw a sub-20 F/P/E.

Table data source: Yahoo! Finance

Note: VPL or Vanguard Pacific VIPERs is based on the MSCI Pacific Index which includes a large exposure to Japan.