Investing

Japanese ETF Shines as Country's Stocks Are Embraced by Investors Again

Larry Ramer

Published: June 7, 2023 10:42 pm

Amid widespread optimism among investors about Japan and Japanese stocks, sentiment toward the iShares MSCI Japan ETF (US:EWJ) is quite positive, according to readings on Fintel’s quant dashboards.

The exchange-traded fund, which has assets under management of nearly $11 billion and is operated by the large U.S. investment manager BlackRock, is one of Wall Street’s most widely owned ETFs specializing in Japanese stocks.

Fund Sentiment on EWJ stock is 80.93 on Fintel’s proprietary model, which measures the extent to which major funds are accumulating the shares. For comparison, the $2 billion AUM WisdomTree Japan Hedged Equity Fund (US:DXJ) scores 36.35. For investors, EWJ has an expense ratio of 0.50%, while DXJ charges 0.48%.

The exchange-traded fund also shows up on Fintel’s Dividend Yield Screen, which finds all securities with a dividend yield greater than 4%.

Bullish Options Bets

As far as options are concerned, the overall put/call ratios on June 5, June 2, June 1, and May 31 were all either 0.30 or 0.31. That means that roughly 70% of the options on EWJ that have been bought are bullish call options, while only 30% are bearish put options.

Moreover, as of June 6, the put/call ratios for options that expire on June 16 and July 21 are 0.07 and 0.04. That means that over 90% of the options that expire on those days are bullish call options.

Investors Optimistic on Japan

Japan’s key stock gauge, the Nikkei 225 index, in May reached its highest level since 1990, when the Japanese economy was roaring. As of June 6, the index had jumped nearly 25% in 2023. Meanwhile, the EWJ soared 29% between last Sept. 30 and June 6.

The celebrated American investor, Warren Buffett, in April reported that “he owned more stocks in Japan than in any other country besides the U.S.,” Investor’s Business Daily noted. In 2020, Buffett bought shares in Japan’s five biggest investment banks, and he recently boosted his stakes in those names to 7.4%, from his original stakes of just over 5%.

Among the positive catalysts for Japanese stocks has been an increase in inflation in the country, which had for decades been plagued by extremely low and, at times, negative inflation.

That has changed in recent years, and inflation in the country is now trending around 3%-4%. Meanwhile, the weakening of Japan’s currency is helping the country’s large export sector, and its interest rates are staying low. Moreover, Buffett’s statement has drawn investors’ attention to the country’s stocks.

Familiar Names

EWJ holds 238 companies in its portfolio. The two top components are very well-known companies — Toyota (US:TM) [4.34% of assets] and Sony (US:SNE) [3.56%].

Ranking third [3.83%] is a less-familar name, Keyence (JP:6861), which manufactures and markets automatic controlling equipment, measuring instruments and other electronic application equipment.

Global bank Mitsubishi UFJ Financial (JP:8306) is the fourth-biggest holding [2.32%], while Tokyo Electron (JP:8035) ranks fifth [1.86%].

This article originally appeared on Fintel