The Nikkei 225, EWJ Or DXJ?

July 08, 2011

 

 

 

 

Tying It All Together

As expected, EWJ outperformed DXJ over the past year during a period when the yen gained roughly 8 percent against the dollar. And just as a reminder, the new Nikkei 225 fund will also be nonhedged and priced in dollars, so it should also benefit from a strengthening in the yen.

DXJ vsEWJ

Source: Bloomberg

However, if the G7 intervention leads to a reversal in the strong yen trend and fuels a recovery in Japanese equities, the upside for returns in nonhedged funds like EWJ and the new Nikkei fund could be muted from a weakening yen.

So, while EWJ and the new Nikkei fund may be the play for investors bullish on the yen, those who expect a reversal in the yen's strength and who are bearish on the Japanese currency might consider DXJ to be the better play.

 

Ticker EWJ DXJ NKY**
Fund Name iShares MSCI Japan Fund WisdomTree Japan Hedged Equity Fund MAXIS Nikkei 225 Index Fund
Index MSCI Japan Index WisdomTree Japan Hedged Equity Index Nikkei 225 Index
Inception 3/12/1996 6/12/2008* In Filing
Expense Ratio 0.54% 0.48% 0.50%
AUM ($M) $7,230 $548 N/A
Number of Holdings 323 318 225***
Top 5 Holdings Toyota (5), Honda (2.7), Mitsubishi UFJ (2.6), Canon (2.3), Sumitomo Mitsui (1.7) NTT DoCoMo (3.8), NTT (3.2), Toyota (3), Mitsubishi UFJ (3), Canon (2.8) Nikkei 225 Index Replication**
Weighting Scheme Market Cap Weighted Fundamentally Weighted Price Weighted
Currency Hedged? No Yes No

Data as of 7/5/2011
*Prior to April 1, 2010, DXJ was named the WisdomTree Japan Total Dividend Fund.
**NKY is still in filing with the Securities and Exchange Commission, and all information is according to the N-1 filing.
***According to the N-1, the fund will replicate the Nikkei index, except where replication is not possible or practical.


Disclosure: I am currently long DXJ.


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