Japan: Weekly ETF and CEF Performance

Japanese ETFs trading in the U.S. mostly traded to the upside last week, led by an 8% rise by the Japan Smaller Cap Fund, Inc. (JOF) closed-end fund. However, year-to-date Japan continues to underperform regional and global benchmarks by a wide margin.

As of Friday's close, the Nikkei 225 remained about 100 points (~0.5%) off its June 21 seven-year high close of 18,240, but at the end of the morning session Monday, the N225 was trading right at 18,240, on surprisingly strong May machinery orders.

According to data from the Nikkei Shimbun, as of Friday's close, the N225 components have a price-to-book ratio of 2.07, ttm p/e of 20.72, f/p/e of 19.53 and a dividend yield of 1.08% (expected) and 1.01% ttm.

See the chart below of the N225 as of Friday's close.

The 10 Japanese ETFs (including 2 CEFs) trading in the U.S. gained 1.4% (combined average) last week, and edged back into positive territory year-to-date by the same amount.

Here's their combined average return over the past two months:

06/22 - 06/29: +0.7%
06/15 - 06/22: -1.6%
06/08 - 06/15: 0.0%
06/01 - 06/08: -0.6%
05/25 - 06/01: +2.9%
05/18 - 05/25: +0.3%
05/11 - 05/18: -3.4%
05/04 - 05/11: +0.4%

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.

WisdomTree's (WSDT.PK) three Japan funds lagged after leading all advancers two weeks ago.

Vanguard's Pacific Stock ETF (VPL) gained 1.5% and continues to lead all Japan ETFs ytd (+7.7%). It was helped by its exposure to Hong Kong [iShares Hong Kong (EWH)], Australia (EWA) and Singapore (EWS).

iShares MSCI Japan Index (EWJ), the most actively traded country-based ETF, gained 0.8%, and is now up 3.0% for the year.

Japan Smaller Capitalization Fund, Inc. (JOF) climbed 7.8%, leaving it down just over 5% for the year. According to Morningstar.com, it is trading at a 7.5% premium to NAV.

Japan Equity Fund, Inc. (JEQ), also a closed-end fund, rose 1.3% putting it back in positive territory ytd at +0.8%. It is trading at a discount of 4.3% to NAV.

The yen remains weak against the US$. See CurrencyShares Japanese Yen Trust (FXY) ETF year-to-date chart:

For your reference, here's a list of the 10 funds surveyed in this weekly summary.

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)