It’s time for Japanese ETFs

Mid-term elections took place in Japan during last weekend. Some ETFs that track country’s market react positively to results.

The yen fell but the biggest Japanese ETF, the iShares MSCI Japan ETF, finished higher. It has delivered a solid performance even in the face of the U.S. dollar slumping and the yen being solid. Japanese stocks are usually adversely affected by a stronger yen due to the economy’s high dependence on exports. What is important Japanese stocks are attractively valued relative to other developed markets.

There might be other winner of yen’s situation – iShares Currency Hedged MSCI Japan ETF. Currency hedged ETFs have been losing assets this year because of the weak U.S. dollar, but now it probably will change due to slumping yen.

“We see the outcome as a mild positive for Japanese equities, though recent strong performance may spark some profit taking,” said BlackRock in a recent note. “We like Japanese shares thanks to the synchronized global expansion supporting growth, attractive valuations and solid earnings momentum. We favor sectors that have posted solid earnings but lagged the broader market, such as autos, transportation and real estate. We also see the election result as a mild negative for the yen and Japanese government bonds.”

The Tokyo equity market remains in a bullish mode, so we should expect Japanese ETFs to grow even more in the future. Check out our table with best performing ones: