Japan: Weekly ETF and CEF Performance

Every Japanese ETF trading in the U.S. posted a loss last week, erasing back-to-back weekly gains, with half now trading negative for the year.

First, note there was yet another Monday rally for the Nikkei 225, +0.9% to 17,556.

However, the same question remains: if it can hold onto the gains, unlike the last couple of weeks.

The N225 is still around 4.0% off its 52-week and multi-year high of 18,300.39 (intra-day; it closed at 18,215.35) set on Feb. 26. (See chart below: 5/18)

The 10 Japanese ETFs (including 2 CEFs) trading in the U.S. lost a combined average 3.4% last week and are down 1.5% for the year -- they are severely underperforming other regional ETFs, based on an analysis of iShares Asia region country-based ETFs.

Here's their combined average return over the past several weeks:

05/04 - 05/11: +0.4%
04/27 - 05/04: +0.8%
04/20 - 04/27: -1.7%
04/13 - 04/20: +0.6%
04/05 - 04/13: -0.9%
03/30 - 04/05: +0.7%
03/23 - 03/30: -2.1%
03/16 - 03/23: 3.1%

See the chart below for more details of last week's and ytd returns.

Click to enlarge chart

Disclosure: The author does not own shares of any funds mentioned in this article.

Vanguard's Pacific Stock ETF (VPL) continues to lead all Japan ETFs year-to-date (+4.7%), helped by its exposure to Australia, Hong Kong and Singapore, although not as much in prior weeks (since two of those three had weekly losses per their iShares ETF) as it too lost 1.7% for the week.

iShares MSCI Japan Index (EWJ), the most actively traded country-based ETF, lost 2.0% and is barely up (0.3%) for the year.

The Japan Smaller Cap Fund (JOF), one of two closed-end Japan funds, dropped more than 9.0% and is now down 14.5% year-to-date. The Japan Equity Fund (JEQ) lost 3.6%, falling in negative territory (-1.2%) for the year.

The yen continues to trade near an all-time low against the euro and is now at more than a three month low around the 121.5 level against the US$. See the chart below of the CurrencyShares Japanese Yen Trust (FXY) ETF, which was launched earlier this year.

For your reference, here's a list of the 10 funds:

iShares MSCI Japan Index (EWJ)
iShares S&P/TOPIX 150 (ITF)
Japan Equity Fund, Inc. (JEQ)
Japan Smaller Capitalization Fund, Inc. (JOF)
SPDR Russell/Nomura Prime Japan (JPP)
SPDR Russell/Nomura SmallCap Japan (JSC)
Vanguard Pacific Stock (VPL)
WisdomTree JP High-Yielding Equity (DNL)
WisdomTree JP SmallCap Dividend (DFJ)
WisdomTree JP Total Dividend (DXJ)

Comments

[Michael Bom...:]

Hello Steven, I just recently noted the divergence of the Small Cap funds DFJ and JOF over the past month and wondered what your take on this was. Is there any particular company that JOF could have held at a great weight that has really been hit hard enough to cause such a large divergence?

2007 May 21 10:50 AM