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3 Funds to Gain as Japan's Economy Gathers Steam


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Japan has exhibited economic resilience amid global economic downturns. The country's retail sales surged to a 10-month high in October. Further, exports from Japan also bettered its performance last month compared with September.

Such developments indicate that the country's economy is treading on a steady path. Under such circumstances, investing in mutual funds from Japan seems prudent.

Japan's Retail Sales Hits 10-Month High

Japan's retail sales grew at the fastest pace in the last 10 months in October. Retail sales grew 1.2% in October, up from 0.1% in the previous month. The metric also achieved a 3.5% annual rate of growth last month from a year earlier.

This was achieved on the back of increased spending on fuel, cars, medicines and cosmetic products. Such developments shed light on the fact that private consumption in the country is gaining momentum and would likely propel its economic growth.

Accounting for roughly 60% of Japan's economic growth, strength in retail sales implies that the economy is recovering and the labor market remains robust.

Export Activity Rebounds in October

Export activity in the world's third-largest economy rebounded in October. The latest data, which was released on Nov 19, showed that exports in the country grew 8.2% last month. This followed a drop of 1.3% in September, which was the result of a spate of natural disasters that rendered an international airport out of service as well as crippled factory output.

Japan's exports to China, its biggest trading partner, grew 9% last month. This was supported by a steady rise in exports of cars, car engines and plastic raw materials to the country. Finally, exports to the United States increased 11.6% last month, boosted primarily by shipments of cars.

3 Best Fund Choices

We have thus selected three Japan mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from such factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5,000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more:  Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money ).

T. Rowe Price Japan  PRJPX seeks capital appreciation in the long run by investing the majority of its assets in securities of companies based in Japan. PRJPX invests in various Japanese companies and industries, irrespective of their size.

This Sector - Japan - Equity product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds,  please click here .

PRJPX has a Zacks Mutual Fund Rank#1 and an annual expense ratio of 0.97%, which is below the category average of 1.27%. The fund has three and five-year returns of 12.3% and 8.4%, respectively.

DFA Japanese Small Company I DFJSX seeks long-term capital growth. The fund achieves its objective by investing the lion's share of its assets in its corresponding master fund, the Japanese Small Company Series. DFJSX invests at least 80% of its assets in securities of small companies from Japan.

This Sector - Japan - Equity product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds,  please click here .

DFJSXhas a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.54%, which is below the category average of 1.27%. The fund has three and five-year returns of 10% and 8.1%, respectively.

Hennessy Japan Investor  HJPNX seeks appreciation of capital in the long run. The fund invests the majority of its assets in securities of companies from Japan. HJPNX is a diversified fund and invests in a variety of assets.

This Sector - Pacific Rim-Equity product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds,  please click here .

HJPNX has a Zacks Mutual Fund Rank #1 and three and five-year returns of 20.7% and 14.4%, respectively.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Mutual Funds
Referenced Symbols: PRJPX , DFJSX , HJPNX



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