Giant Japan ETF Attracts Billion Dollar Flows

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Japan ETFs are attracting big 2018 year-to-date flows, especially the iShares MSCI Japan ETF (NYSEArca: EWJ), the largest US-listed exchange traded fund tracking Japanese equities.

Year-to-date, investors have added $2.67 billion to EWJ, good for the eighth-best inflows among all ETFs trading in New York.

While the giant Japan fund is not setting the world on fire in terms of performance, it is attracting investors, including some options traders.

Further supporting the notion of buying Japan ETFs, Japanese equities are growing less correlated to the whims of its yen currency. Traders have typically driven up Japanese equities in light of a weak yen currency due to the economy’s heavy reliance on exports as a weaker currency makes their products more competitive on the global market.

“The most heavily populated EWJ strikes reside in the June series, with the 60 put at the top of the list. The bulk of the 41,367 contracts outstanding here were initiated back on Jan. 23, when EWJ was trading near $64.50. Traders also targeted the June 69 call that day, which is home to peak call open interest of 27,572 contracts,” reports Schaeffer's Investment Research.

“More recently, the fund's June 56 and 59 puts have seen the biggest increases in open interest over the past two weeks. Trade-Alert shows the majority of the action occurred on March 7, due to one trader possibly initiating a long put spread,” according to Schaeffer's.

An Alternative Japan ETF to Consider

An alternative to EWJ includes the Deutsche X-trackers Japan JPX-Nikkei 400 Equity ETF (NYSEArca: JPN), which recently lowered its annual fee to 0.09% from 0.15%, making it one of the least expensive Japan ETFs on the market.

The JPX-Nikkei 400 Index was launched in January 2014 as a means of reinvigorating the Japanese equity market. The JPX-Nikkei 400 Index employs a rigorous screening process based on return on equity, cumulative operating profit and market capitalization to select high-quality, capital-efficient Japanese companies.

For more information on the Japanese markets, visit our Japan category.

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