Top Macro ETFs From Alpha Think Tank

July 23, 2014

JAPAN db X-trackers MSCI Japan Hedged Equity (DBJP | B-70)

Japanese equities rallied sharply in 2013, but Jim Rogers reminded us in February that the Nikkei 225 Index is still 60-70 percent below its all-time highs set more than 20 years ago. He thinks Abenomics will eventually ruin Japan, but in the meantime, he believes the massive amounts of money being printed will likely find its way into the stock market.

Stratfor’s George Friedman told us in March he’s optimistic about Japan, pointing to the country’s internally held debt and its ability to maintain full employment in spite of the “lost decade.” He sees Japan as a country moving forward in the coming five to 10 years.

Meanwhile Roubini, in a June interview, pointed to some green shoots in Abe’s “third arrow” of structural reforms, including plans to reduce corporate taxes and reform Japan’s government pension investment fund. After a slow start in 2014, he thinks Japan is poised to rally in the second half of the year.

Regarding the yen, Roubini expects additional quantitative easing from the Bank of Japan sometime next year. Axel Merk, the well-known currency investor, also thinks further stimulus from the Bank of Japan is inevitable. In the long run, he expects further depreciation in the yen due to the BoJ’s current monetary policies.

For a currency-hedged Japanese equity play, DBJP provides the most marketlike coverage of Japanese equities. For 45 basis points a year, the cap-weighted fund captures roughly 240 large- and midcap Japanese companies, all while neutralizing exposure to the dollar-yen currency cross. Despite a slow start, DBJP is now fairly large, with $436 million in assets under management. Liquidity has picked up— it trades roughly $2 million a day at 4-cent spreads.

DBJP YTD

 

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