For Immediate Release
Chicago, IL – September 22, 2016 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include WisdomTree Japan Hedged Financials Fund (DXJF), WisdomTree Japan Hedged Equity Fund (DXJ), iShares JPX-Nikkei 400 ETF (JPXN), iShares MSCI Japan Small-Cap ETF ( SCJ) and CurrencyShares Japanese Yen ETF (NYSE:FXY) (FXY).
Today, Zacks is promoting its ''Buy'' stock recommendations. Get #1Stock of the Day pick for free.
Here are highlights from Wednesday’s Analyst Blog:
BoJ Stirs Stimulus: ETFs to Win and Lose
The global market literally held its breath to see what the Bank of Japan (BoJ) comes up with in its latest policy meeting amid slackening economic conditions in that country. Notably, consumer prices in Japan fell 0.4% year over year in July 2016, maintaining the same clip as it had in the prior two months. July represented the fifth consecutive month of decline.
The Japanese economy grew 0.2% sequentially in the June quarter of 2016 compared with an initial estimate of a stagnation. On an annualized basis, the economy grew 0.7% compared with the previous reading of a 0.2% expansion (read: Japan's Economy Slowed in Q2: ETFs in Focus ).
In such a feeble scenario, markets hoped for more stimulus and to a large extent the central bank did not disappoint market participants. No, the bank did not push interest rates further into the negative territory thanks to its inadequate success. Rather it held the rate steady in the September 21 meeting. But as new initiatives, the bank launched a fresh set of changes to its ongoing policies. Let’s dig a little deeper.
Inside BoJ’s Latest Moves
First, the bank will now control the bond yield-curve. It will issue a zero interest-rate target for 10-year government bonds to counter deflationary threats and accordingly buy bonds. The implementation of a long-term target was never tried before by BoJ.
The BOJ also indicated that its goal for increasing the monetary base via asset buyback, set at 80 trillion yen annually, may now vary in the short term. The bank in fact intends to “expand the [monetary] base until growth in the consumer price index (CPI) excluding fresh food " overshoots " its 2 percent target.”
Markets now term Japanese measures as quantitative and qualitative monetary easing with yield curve control or QQEYCC.
Market Reaction
In short, the focus of the policy measures shifted to 10-year interest rates from the so-far asset purchase program. As per Wall Street Journal, market participants are divided in two sections. While one cohort sees this as a limitation to the BoJ’s ability to further boost its ultra-easy monetary policy, another section greeted the new approach (read: Why Japan ETFs Are on an Incredible Run).
There are analysts who believe that “this buys governor Kuroda some time and leaves the door open for more rate cuts/policy easing which has seen the Yen weaken to the benefit of Nikkei exporters and helped financials rally (read: Is Japan Financial ETF Under Pressure?).”
Investors’ glee was reflected in Nikkei’s gains of about 2% at the Japanese market close. Another Japanese index Topix advanced about 2.7%. The Japanese currency yen fell slightly against the U.S. dollar just after the BoJ decision. A weaker yen will likely send Japanese stocks higher in the coming days.
Likely ETF Winners & Losers
Bank stocks should benefit from this move. No more pushing of rates into the negative territory came as a welcome relief for bank stocks. WisdomTree Japan Hedged Financials Fund (DXJF) should be a beneficiary out of this move as bank stocks perform better with the steepening of the yield curve, which is going to be the case for the Japanese economy now.
Among other winners, Japan ETFs are likely to gain ahead. These areWisdomTree Japan Hedged Equity Fund (DXJ) ,iShares JPX-Nikkei 400 ETF (JPXN) ,MAXIS Nikkei 225 Index ETF and iShares MSCI Japan Small-Cap ETF (SCJ) are to name a few (see all Asia-Pacific (Developed) ETFs).
Japan’s 10-year government bond yields entered the positive territory for the first time in six months after BoJ vowed to buy debt to keep yields near zero. With the rise in long-term yields, Japanese bonds are likely to take a dive ahead. This puts PowerShares DB Japanese Govt Bond Futures ETN in focus.
CurrencyShares Japanese Yen ETF (FXY) is also likely to retreat in the near term in the wake of a weakening yen. However, RBC Capital Markets noted that “the BOJ may have changed the interim target to the yield curve, but the instruments it is using to hit it are basically unchanged, barring minor tweaks.” So, it remains to be seen how long the Japanese market reacts to the changes in monetary policies.
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WISDMTR-JP HFF (DXJF): ETF Research Reports
WISDMTR-J HEF (DXJ): ETF Research Reports
ISHARS-JP NK400 (JPXN): ETF Research Reports
ISHARS-MS JA SC (SCJ): ETF Research Reports
CRYSHS-JAP YEN (FXY): ETF Research Reports
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