Analyse/iShares MSCI Japan

Nach der furiosen Aufholjagd 2013 hat der japanische Aktienmarkt in diesem Jahr einen Dämpfer bekommen. Die unverändert expansive Notenbankpolitik der BoJ und die Aussicht auf Strukturreformen bieten Chancen für risikofreudige Investoren.

Rolle im Portfolio

The iShares MSCI Japan UCITS ETF provides broad-basket mid and large-cap exposure to Japanese equity markets.

Given its narrow geographic exposure, this ETF is best utilised as a tactical or satellite holding within an already well-diversified portfolio.

The fund's reference index has maintained moderate levels of correlation to the S&P 500 (56%) and the STOXX Europe 600 (49%) over the past ten years. This suggests that there may be potential diversification benefits to be gained when adding this fund to an existing diversified portfolio of European and US equity. However, before investing in this fund, we suggest investors check their portfolio for existing exposure to Japan. Japan, as one of the largest economies in the world, accounts for significant weightings in global equity funds and Asia-focused funds in particular. Japanese equities can comprise 9% to 25% of a typical global equity portfolio, and about half of a typical Asian equity portfolio (using the MSCI World, MSCI EAFE, and MSCI AC Asia indices as benchmarks).

 Investors should be aware of currency risk as the fund does not hedge its Yen exposure. A weakening Yen, as experienced in 2013, will weigh on the performance of the fund as denominated in the investor’s home currency. Conversely, a strengthening Yen will enhance its returns.

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Fundamentale Analyse

Despite having applied massive amounts of fiscal and monetary stimulus, Japan continues to trudge along a difficult road towards economic well-being. For the best part of 20 years the world’s third largest economy has struggled against persistent deflationary pressures and a spiralling public debt burden, precipitated by the falling tax revenues associated with an aging population and weak levels of growth.

Shinzo Abe, Japan’s Prime Minister, entered office in December 2012 promising fiscal stimulus, monetary easing and structural reforms. These policies, popularly referred to as ‘the three arrows of Abenomics’, are designed to kick-start and maintain economic growth. Since their introduction, these measures have devalued the Yen, which has fallen by around 20% against the US dollar, and boosted domestic equity markets.

These policies have provided some relief for the country’s exporters, who had laboured under a strong Yen since 2008. The Japanese car industry, for example, saw exports grow 31.3% year-on-year at the end of 2013. Despite this, in January 2014, Japan’s trade deficit reached record highs as imports continued to outpace exports. The country’s soaring energy costs have been a significant contributor to this, lifted by a combination of reduced domestic energy supply following the fallout from the 2011 Fukushima nuclear disaster and the increased costs of importing energy imposed by a weaker Yen.

Fuelled by unprecedented monetary and fiscal stimulus, Japan’s GDP grew by 2.5% in 2013. Furthermore, the impact of ‘Abenomics’ on the country’s equity markets has been impressive, with the Nikkei 225 index climbing 47% over the same period. Although it should also be noted that while equity markets gains have been dramatic, index levels remain around 20% below the highs registered just before the credit crisis of 2007/08, which in-turn remain around 50% below the all-time highs registered in the late 1980s.

Looking forward, however, the ability to sustain this growth lies with the implementation of structural reforms, or the ‘third arrow’. The reforms currently on the table, including a competition promoting bill aiming to increase capital investment levels, may not be enough to provide the economic foundations necessary for long-term growth. For this, the introduction of more potent measures, such as corporate tax cuts, labour market reforms and the dismantling of current trade barriers may be required.

Meanwhile, the first of two planned hikes in the domestic consumption tax, from 5% to 8%, slated for April 2014, is likely to prompt a fall in domestic consumption. The market impact of this change remains to be seen, however the response will provide investors with a valuable indicator of the sustainability of the recent market gains.

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Indexkonstruktion

The MCSI Japan Net Total Return Index includes approximately 85% of the free-float adjusted market capitalisation of the Japanese equity market. Components must meet minimum criteria for liquidity, foreign ownership, as well as a waiting period for newly-listed stocks. The index is composed of Japanese securities across the four major Japanese exchanges: Tokyo Stock Exchange, Osaka Stock Exchange, JASDAQ, and Nagoya Stock Exchange. Eligible securities are weighed by free-float adjusted market capitalisation, which serves to ensure that the underlying liquidity of the holdings is superior relative to a pure market capitalisation weighting. The index is reviewed quarterly, with May and November semi-annual reviews tending to be more comprehensive than those undertaken in February and August. As of this writing, there are 320 companies included in the index. The top sector weighting is Consumer Discretionary (20% to 22%), followed by Financials and Industrials which each maintain 19% to 21% of index weight. At the time of writing, Toyota is the largest constituent with around 6% of the total weight, followed by Mitsubishi (2.8%) and Softbank (2.7%).

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Fondskonstruktion

This ETF fully replicates the performance of the MCSI Japan Net Total Return Index by holding all the index constituents at the same weight as stipulated by the index. The ETF is an accumulating fund and as such it reinvests all the dividends received by its holdings into the fund. This fund was acquired as part of iShares’ acquisition of Credit Suisse’s ETF unit in the summer of 2013. Consequently, the fund does not currently engage in securities lending, although iShares is known to be reassessing the situation, and may decide to add this fund to its securities lending programme in future. The fund is domiciled in Ireland and was originally launched in January 2010. Its base currency is Japanese Yen.

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Gebühren

The iShares MSCI Japan UCITS ETF charges a total expense ratio (TER) equal to 0.48%, which is comparable to other ETFs tracking Japanese equity indices. It should be remembered that there are additional, investor-specific costs associated with trading the ETF, such as bid/offer spreads and brokerage commissions, which should be factored into an investment decision. There are also rebalancing costs whenever the index changes composition.

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Alternativen

There is no shortage of ETFs available offering broad-basket Japanese equity exposure. When selecting the appropriate product, in addition to cost, investors should consider their dividend and replication preference.

The Vanguard FTSE Japan UCITS ETF, which levies a TER of 0.19%, is the cheapest alternative. This ETF offers physically-replicated exposure to the FTSE Japan Index. This fund may be suitable for those investors seeking income, as dividends are distributed to investors quarterly.

The db x-trackers MSCI Japan Index UCITS ETF is the most popular synthetically replicated ETF following large cap Japanese equities, as measured by AUM. For this, db x-trackers levies a TER of 0.35% or 0.50% depending on the required dividend treatment.

Investors seeking protection from currency risk may consider currency-hedged alternatives. The iShares MSCI Japan EUR Hedged UCITS ETF is the most popular European ETF, as measured by AUM, offering Euro-hedged exposure to the Japanese equity markets. Investing in the fund minimises Yen/Euro currency risk in a single transaction removing the need for an investor to monitor and maintain a currency hedge. The fund changes a TER of 0 .64% which is significantly more than that charged for the unhedged equivalent. iShares also offer MSCI Japan ETFs hedged to the British Pound, Swiss Franc and the US Dollar.

Although the MSCI Japan Index is the most popular index tracked by European domiciled ETFs, there are ETFs available which offer exposure to other well-known Japanese equity indices such as the Nikkei 225 or the TOPIX, which only include stocks listed on the Tokyo Stock Exchange.

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Über den Autor

Morningstar ETF Analysts  Alan Rambaldini is an ETF analyst with Morningstar.