We have seen a swell in trading volume and some liquidation in the largest “Japan Equity” tracking ETF in the marketplace recently, EWJ (Expense Ratio 0.48%, $17.2 billion in AUM).
While the over $740 million that has left EWJ in recent sessions is not a giant amount for the fund in terms of the overall asset base, it is still notable given the choppiness we have seen in the Japanese equity market lately, with the fund having a poor month of June that bled into July where the fund clipped its 50 day MA briefly before rebounding to today’s levels.
It seems that the break of the 50-day MA in fact spooked some investors out of the fund, as we saw a 20 million share trading day several sessions ago, and of course the redemption activity that we spoke about above in tandem with this.
EWJ is still the asset king in the “Japan Equity” space by a large margin, with the next funds of substance in the space being the $8.3 billion DXJ (Expense Ratio 0.48%), the $1.7 billion DBJP (Expense Ratio 0.45%, $1.8 billion in AUM), and the $1.2 billion HEWJ (Expense Ratio 0.49%).
With the recent redemptions in EWJ, it actually reverses year-to-date net flows into the negative ($55 million out in 2017), and we have seen a similar YTD effect in the other funds that have been mentioned: (DXJ (-$66 million), DBJP (-$373 million)) with the exception of HEWJ (+$288 million).
EWJ has a heavy “Large Cap” slant (93% of the portfolio) and minimal (7%) exposure to Mid-Caps, and top representation by name in the fund is as follows: 1) Toyota Motor (4.28%), 2) Mitsubishi UFJ Financial Group Inc. (2.50%), 3) Lion Corp. (2.09%), 4) SoftBank Group Corp. (2.02%), and 5) Sumitomo Mitsui Financial Group Inc. (1.65%).
Toyota, the largest holding in EWJ, is slated to report earnings on August 9th. Given the recent price and redemption selling pressure on EWJ we should also look at the lone “Bear” funds in the Japan Equity space such as the $10 million EWV (Expense Ratio 0.95%), which conceptually should see an uptick in interest and trading volume if the selling in Japanese Equity tracking ETFs like the aforementioned continues into the summer.
The iShares MSCI Japan ETF was trading at $53.43 per share on Thursday morning, down $0.14 (-0.26%). Year-to-date, EWJ has gained 9.35%, versus a 9.26% rise in the benchmark S&P 500 index during the same period.
EWJ currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 76 ETFs in the Asia Pacific Equities Ex-China ETFs category.