Futu Research | ETF Investment Research
[Japanese Stock ETF] What are the Japanese Stock ETFs? How to Invest in the Japanese Market in Hong Kong
The Japanese stock market has seen a major reversal of the stock market since 2023, showing a trend that has been driven by the weakness of the economy, and the stock market has seen its biggest upswing since 1989, continuing to be supported by corporate profit growth, capital efficiency gains and the policy environment supporting market movements. Today, the Nikkei 225 Index gained 0.5% to 40109.23 points, gaining more than 0.04 million points for the first time in history.
How does the Japanese market continue to rise?
Warren Buffett's view of the logic of long-term stock market pricing can be articulated by his famous parable: “In the short term, the stock market is a voting machine; in the long run, the stock market is a weighting machine.”
It is clear that Japan is currently the “voting machine” and the “heavy machine” generating resonance.
1. Short-term voting machine
Currently, the Japanese economy is benefiting from labor growth and the heat and consumption of the economy, and corporate earnings continue to improve to generate stable cash flows. Japanese GDP in the yen price has increased (not counting the relative value of the USD), regardless of the value of the Forex currency.
Inflow of foreign funds into the space is huge, with only a quarter of its historical value. Analysis shows that the current stock market ratio is only around 15 to 16 cents, well below the 60 points during the Japanese bubble bust of the 1990s.
2. Long-lasting weighing machine
Investors around the world are not only mindful of the long-term growth of Berkshire Hathaway Inc.'s global fortunes towards Japan's large corporations, but also note the radical shift in the growth of listed companies in Japan in terms of Shareholder Value: In 2023, the stock market's share buyback power was unprecedented. The total repurchase volume increased to a new record of ¥9.6 trillion, a record high of two consecutive years.
Therefore, in view of the depreciation of the yen, the Japanese stock market went through an unusually strong bull market. Not only that, we have very diversified instruments to trade.ETFAs a convenient investment tool, it provides investors with a simple and efficient way to participate in the performance of the Japanese stock market. There are many different types of ETFs to choose from in both domestic and overseas markets. Next, we will introduce some of the most representative Japanese equity ETF products.
Japanese Equity ETFs on the Hong Kong Stock Market
To investJapanese Stock MarketThere are three options in Hong Kong stocks:
1. $ChinaAMC MSCI Japan Hedged to USD ETF(03160.HK)$: Follow the MSCI Japan Stocks Index (100% USD), and management fee is 0.5% every year.
2. $Global X Japan Global Leaders ETF(03150.HK)$: Following FactSet Japan's Global Leading Indicators, investors can invest in 20 leading Japanese companies in different Industries, covering Consumer Electronics, Computers, Cars, Semiconductors, and Medical Devices. Renewal fee for one year is 0.68%.
3. $CSOP Nikkei 225 Index ETF(03153.HK)$: Southeast British Pound (CSOP), launched in Hong Kong in January 2024, is Hong Kong's premier ETF tracking the Nikkei 225 Index. ETF's listing price is set at HK$78 per unit, the minimum trading unit is 10 shares, and the annual management fee is 0.99% of the Funds Net Worth.
Japanese Equity ETFs in the US Stock Market
1. $iShares MSCI Japan ETF(EWJ.US)$: Provides a way to invest in the Japanese stock market and track the MSCI Japan Index.
2. $WisdomTree Japan Hedged Equity ETF(DXJ.US)$ : This ETF is not only investing in the Japanese stock market, but by reducing the impact of exchange rate changes against the risk of the yen exchange rate, but for investors who are wary of finding value in exchange rates, this ETF is the best time to expect.
3. $Ishares Jpx-Nikkei 400 Etf(JPXN.US)$: Investing in high-quality Japanese companies with JPX-400 index covers a wide range of industries.
4. $JPMorgan BetaBuilders Japan ETF(BBJP.US)$: Tracks the Morningstar Japan Target Market Exposure Index, providing a wide range of exposure to the Japanese stock market.
5. $Vanguard FTSE Pacific ETF(VPL.US)$: Follow the FTSE Japan Index, which includes various model companies listed on the Japan Exchange.
Exchange Rates Risk is the High Indeterminacy in the Current Investment Day (ETF)
Different countries' and regions' economic development levels, market patterns, policy stability, and regulatory environment produce a similar impact on the performance of overseas and cross-border ETFs. Therefore, before investing, it is essential to study economic conditions, MMF policy trade, trade relations and diving risks.
For daily equity ETFs, the risk of easy loss is the risk of MMF exchangeRates.
with$CSOP Nikkei 225 Index ETF(03153.HK)$For example:
Other Fundamental Assets are priced in JPY, meaning that these Funds invest in Japanese company stocks that are priced in Japanese Yen. However, in Tier 1 markets, when investors need to increase their investments to Funds (apply for cash or withdraw investments), these trades are conducted in the form of USD converted into JPY.
Beyond that, the Funds distribute the dividends (if any) to investors, which are paid in HKD. As a result of this, Funds Net Worth Will Reach USDYen Exchange RatesVolatility: Assets of Funds may rise or fall in value as the USD rises or depreciates against the JPY.
In the second-tier market, i.e. on the Hong Kong Stock Exchange, investors buy and sell units of this ETF to trade in HKD. Therefore, for investors who buy and sell this Fund on the Hong Kong Stock Market, we should not only pay attention to the performance of the Funds but also to the changes in the Exchange Rates between HKD and JPY. Since exchange rate fluctuations can lead to our overproduction costs or losses when buying and selling Funds, the performance of the Funds will remain stable and may be reflected in the return on final investments due to exchange rates.
Therefore, in the face of exchange rate risks, from our research, the easiest way to invest directly in ETFs that are aligned with Exchange Rates is to avoid downside risk, but a cryptocurrency has two sides, and the other rule is that if the yen continues to rise in value, it will be productive. Dive into the bottom line of earnings.
