Japan: Weekly ETF and CEF Performance

As I noted in my weekly coverage of Japanese ADRs, market sentiment improved last week as it became clear Japanese stocks were becoming oversold and the yen carry trade wasn't going to blow up. On average, the 10 Japanese ETFs/CEFs trading in the U.S. gained 2.0% last week.

Trading in Tokyo got off to a good start this week with the Nikkei 225 Stock Average gaining 0.75% to 17,292.39, but it is still about 1,000 points off its late February and multi-year high. (See chart below)

The broader TOPIX gained 0.64% to 1,741.36.

The yen weakened further against the dollar, above ¥118/$1, after hitting a recent low under ¥115.5/$1 last Monday.

As mentioned above, the 10 Japanese ETFs (including 2 CEFs) trading the U.S. returned a combined average 2% last week. This compares to returns of -4.8%, +0.9% and +3.6% over the three prior weeks. (See the chart below for details)

Disclosure: The author owns iShares Japan call options.

Click to enlarge chart

The best performer last week was the Japan Smaller Cap Fund (JOF), a closed-end fund, which returned 3.3%, but is down 7.8% over the past two weeks and WisdomTree's Japan High-Yielding Equity Fund (DNL), also returning 3.3% and flat over the past two weeks.

The most actively traded country ETF, iShares MSCI Japan Index (EWJ), returned 1.7% last week, but is down 2.3% over the past two weeks. Although it does not track the Nikkei 225 directly, considering the latter benchmark is still about 1,000 yen off its recent highs and given the now weakening trend of the yen, EWJ may have some trouble recovering $15. Remember options expire this week.

Overall, one can see the Japanese ETFs and CEFs were hit rather hard during the global sell-off, but many managed to gain back some of those losses. WisdomTree's Japan SmallCap Dividend (DFJ) fund and the SPDR Russell/Nomura SmallCap Japan (JSC) were the worst performers due to prolonged selling pressure on smaller cap stocks.