The experts say Japanese stocks are cheap and have been saying
that for a while. In late 2011, famed investors Warren Buffett
and Jim Rogers said Japanese equities were cheap. In 2012, there
has been no shortage of market observers offering up the same
Thing is, just because a market looks cheap does not mean it
will deliver noteworthy returns. That has been the case with
its nemesis, China
. Over the past five years, three years, year and year-to-date,
the iShares MSCI Japan Index Fund (NYSE:
) has offered negative annualized returns.
Japan's struggles have not diminished the allure of investing
in the Asia-Pacific region. Those looking to play the
Asia-sans-Japan theme might want to have a look at the unheralded
WisdomTree Asia Pacific ex-Japan Fund (NYSE:
The WisdomTree Asia Pacific ex-Japan Fund has been around
since June 2006 and in that time, the ETF has amassed almost $91
million in assets. AXJL embodies two of the ETF themes WisdomTree
has been a pioneer of: Dividends
and the exclusion of a sector or country
It is the yield that helps distinguish AXJL. The fund
currently has a 30-day SEC yield of 3.47 percent and a
distribution yield of 5.43 percent. Comparable funds cannot even
come close that. The SPDR S&P Emerging Asia Pacific ETF
) yields just 2.33 percent. The The PowerShares FTSE RAFI Asia
Pacific ex-Japan Portfolio (NYSE:
) has a 30-day SEC yield of just 2.64 percent.
AXJL illustrates two points some investors are already
intimately familiar with: Dodging Japan while embracing dividends
has proven efficacious in recent years. The fund boasts
an average annualized return of almost 8.6 percent
and is in the green over the past year, year-to-date and over the
past three years and five years. Despite the exclusion of Japan,
AXJL is not overly risky at the country level. In fact, the ETF
is heavily allocated to developed markets as Australia, Hong Kong
and Singapore account for half of the fund's weight.
Additionally, Taiwan and South Korea combine for over 20 percent
of the fund's weight and a case can be made that
neither should be considered an emerging market
Exotic fare does not account for much of AXJL's lineup.
Combine Malaysia, Thailand, Indonesia, India and the Philippines
and the result is less than 19 percent of the fund's weight.
Indian exposure in AXJL does not come by way of individual
stocks, but through the iPATH MSCI India Index ETN (NYSE:
Financials and telecommunications dominate at the sector
level, combing for almost 47 percent of the fund's weight.
Regarding valuation, AXJL's index trades at about 13 times
earnings and 1.7 times book value, two numbers that compare
favorably with the older, larger iShares MSCI Pacific ex-Japan
Index Fund (NYSE:
Given the recent market doldrums and the notion that U.S.
stocks are the best bet when it comes to developed market
equities, AXJL requires some patience. The fund appears
technically vulnerable and a drop below $63.75 could portend
another $2 or more of downside. That said, the ETF's combination
of strong yield, ex-Japan developed markets exposure and a decent
expense ratio make the fund a good idea for long-term, income
investors. They can just wait for better pricing.
For more on "ex" ETFs, click
(c) 2012 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.