WisdomTree Finds That Japan Giveth and Japan Taketh Away

Investing

Published: May 23, 2013 10:40 am

WisdomTree Investments Inc. (NASDAQ: WETF) has been winning and winning due to its great Japan bet on a hedged Japan Equity ETF, which moved to eliminate the currency risks of the yen devaluation from the equity gains or losses of the Japanese stock market. This basically came to one-quarter of the Wisdom Tree, as the WisdomTree Japan Hedged Equity Fund (NYSEMKT: DXJ) managed to grow and grow. So, take a guess what happens when Japan’s Nikkei stock market falls 7% or so in one session.

Most of you know that Japan’s quantitative easing is actually quantitative inflating, and this newly named Abenomics has really bolstered the price of Japanese stocks. By eliminating the major loss of the value of the yen currency risk, the currency devaluation was largely skipped and this exchange traded fund (ETF) was up a whopping 46% as of the high prints just on Wednesday of this week. That may not sound like it is too much of a gain when you consider how much Japan is pumping into its markets, but that would be an incredible gaining year for any exchange under any circumstances.

The WisdomTree website showed that it had approximately $31.3 billion in ETF assets under management on May 22 when it launched the announced the launch of the WisdomTree U.S. Dividend Growth Fund (NASDAQ: DGRW). The Hedged Equity ETF is represented to have some $5.63 billion in net assets, according to Yahoo! Finance, and $10.7 billion, according to Google Finance. AOL’s Daily Finance represents its market cap as $9.9 billion. The Wisdom Tree site for the DXJ itself as of Thursday morning represents that the fund has $10.7 billion in assets.

With this ETF up so much and having driven Wisdom Tree’s assets up so much, it is no shock that Widom Tree shares themselves are getting pounded on the news. The WisdomTree Japan Hedged Equity (NYSEMKT: DXJ) is down 7.45% at $48.71 and shares of the parent WisdomTree Investments Inc. (NASDAQ: WETF) are now down more than 7% at $12.34. The only good news here is that WisdomTree shares had been down as low as almost $11.00 earlier this morning.

Perhaps the most entrenched and most liquid ETF for Japan is the iShares MSCI Japan Index (NYSEMKT: EWJ) and that is getting pounded as well. Its shares are down 6.6% at $11.32, and at Wednesday’s peak this ETF was up 27.5% so far in 2013. It does not have currency hedging in place.

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