DBJP - DBJP: Currency Tailwinds Receding And Valuations Normalizing (Ratings Downgrade)

2024-05-28 14:28:20 ET

Summary

• The Xtrackers MSCI Japan Hedged Equity ETF has outperformed the S&P 500 Index, returning 37% compared to the S&P 500's 26%.
• The depreciating Yen that has boosted DBJP returns may turn neutral or act as a headwind in the coming months, making further gains harder to come by.
• Japanese equity valuations are no longer cheap on an absolute basis, suggesting a period of consolidation for DBJP.

A year ago, I wrote a bullish article on the Xtrackers MSCI Japan Hedged Equity ETF ( DBJP ), suggesting investors accumulate Japanese equities on any pullbacks as the country's stocks were cheap compared to the rest of the world. So far, my recommendation has proved correct, as the DBJP ETF has outperformed the mighty S&P 500 Index, returning 37% compared to the S&P 500's 26% (Figure 1)....

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