Japan's Nikkei 225 surged 3.55 percent in Tuesday's Asian
session, crossing the 14,000 mark for the first time in nearly
five years. The Topix, the Japanese index that U.S. investors can
get exposure to through the iShares S&P/TOPIX 150 Index Fund
), has moved back to levels not seen since the darkest days of
the financial crisis.
The major Japan
, namely the WisdomTree Japan Hedged Equity Fund (NYSE:
) and the iShares MSCI Japan Index Fund (NYSE:
), are trading modestly higher Tuesday. So is ITF, which has
climbed over 15 percent in the past three months.
With Japanese equities surging, ITF is just one ETF that
there are some other compelling Japan funds
beyond the most familiar names. Some of the following ETFs are
not Japan-specific plays so they can be paired with an ETF such
as DXJ by investors looking to ratchet up their Japan
iShares FTSE EPRA/NAREIT Developed Asia Index Fund (NASDAQ:
) Among developed markets, Japan's dividend reputation pales in
comparison to the U.S. and others, but the iShares FTSE
EPRA/NAREIT Developed Asia Index Fund offers an alluring
combination of 39.6 percent exposure to the land of the rising
sun and a trailing 12-month yield of 5.47 percent,
according to iShares data
As its name implies, IFAS is heavily tilted toward Asia, but
that does not mean significant emerging markets exposure. In
addition to Japan, the ETF's largest country allocation, Hong
Kong and Australia combine for almost 45 percent of the fund's
weight. At the sub-sector level, IFAS is focused primarily on
property development and holding firms (56.5 percent) and retail
REITs (19.8 percent).
IFAS does not offer a currency hedge, but the impact soaring
Japanese stocks are having on the ETF is palpable. The $45.7
million ETF has gained 15.4 percent in the past 90 days. IFAS
charges 0.48 percent per year and is home to 81 stocks.
SPDR Russell/Nomura PRIME Japan ETF (NYSE:
) The aforementioned DXJ and EWJ rightfully dominate the
conversation about Japan ETFs with a large-cap focus, but the
SPDR Russell/Nomura PRIME Japan ETF is worthy of consideration
for those looking for a broad play on Japanese stocks. JPP tracks
the Russell/Nomura PRIME Index, a float-adjusted cap-weighted
index comprised of 1,000 stocks. JPP does not hold all of those
stocks as its current roster is comprised of 388 holdings.
The ETF offers ample exposure to a recovery in Japanese
exports with significant allocations to export-dependent sectors.
Industrials, consumer discretionary and technology combine for
over half of JPP's weight. Although JPP is not a hedged currency
ETF, the fund has benefited from the tumbling yen, gaining more
than 32 percent in the past six months.
The biggest knock on JPP is $25.9 million in assets, a small
sum for an ETF that is more than six years old. JPP has an annual
expense ratio of 0.5 percent and it is not that volatile. JPP's
beta against the S&P 500 is just 0.03,
according to State Street data
PowerShares BLDRS Asia 50 ADR Index Fund (NASDAQ:
) Like IFAS, the PowerShares BLDRS Asia 50 ADR Index Fund is a
multi-country Asia-Pacific fund. And like the iShares REIT
offering, ADRA offers plenty of Japan exposure, 48.47 percent to
be exact. Six Japanese stocks are found among ADRDA's top-10
holdings, including Toyota, which is the ETF's largest holding
with a weight of 12.8 percent. That means Toyota's footprint in
ADRA is 460 basis points larger than the fund's second-largest
holding, BHP Billiton (NYSE:
ADRA's second-largest country weight is Australia at almost
16.4 percent. With Japan and Australia combining for nearly
two-thirds of ADRA's weight, it would be logical to assume this
ETF has been a star performer this year. With a year to date gain
of 5.2 percent, ADRA has been solid though not spectacular.
The drag on ADRA this year has been its exposure
to large, laggard emerging markets
. China, Taiwan, South Korea and India combine for 31.5 percent
of the fund's weight. If two or three of those markets can
rebound and if Japan can keep soaring, ADRA would be an
attractive Asian play.
First Trust Japan AlphaDEX Fund (NYSE:
) Starting in the second quarter of 2011, First Trust rolled out
an expansive suite of international ETFs based on the unique
AlphaDEX methodology that has proven popular and successful
with the firm's U.S. sector funds
While the international AlphaDEX ETFs have not yet been
prodigious gatherers of assets, many have outperformed their more
established rivals. For example, the First Trust South Korea
AlphaDEX Fund (NYSE:
) has outperformed the largest South Korea ETF this year.
Regarding the First Trust Japan AlphaDEX Fund, the ETF has
lagged DXJ and EWJ, but that is more a complement to those ETFs
than a knock on the First Trust offering. Unheralded FJP has
surged 21.5 percent over the past six months and 17.8 percent
Investors expecting an ETF heavy on the usual suspect of
Japanese industry will not find that with FJP. None of FJP's 100
holdings receives a weight north of 2.6 percent, but the good
news is the ETF offers plenty of export exposure with
discretionary and industrial names combining for over 55 percent
of the fund's weight.
For more on ETFs, click
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