2024-03-09 05:55:08 ET
Summary
- Xtrackers MSCI Japan Hedged Equity ETF is a Yen-hedged value-weighted ETF following the most representative possible index of the Japanese market.
- The Yen hedge is not very helpful anymore. While we aren't super confident that the BoJ will pivot, the Yen won't get cheaper than current levels.
- If the Yen appreciates, Japanese markets may not perform as well, but would at least give the consolation of FX gains on Yen denominated stock.
- DBJP is a worst of both words situation, although we note that we don't expect tectonic change in outlook and performance given the likely rate of BoJ rate hikes, which will be cautious and protracted.
Xtrackers MSCI Japan Hedged Equity ETF ( DBJP ) is a Yen-hedged value-weighted ETF following the most representative possible index of the Japanese market. There are myriad reasons to be bullish on Japanese equities, where in our coverage Japan remains the most overweight market. However, there are a lot of outstanding questions about the Yen and speculation around the BoJ pivot that will affect how you play the market. Importantly, data has just been released concerning the shunto and union wage pushes in Japan , that have come in at quite high figures, enough to bring real wages up more pronouncedly. Our last coverage was focused on the USD , where we were considering that the Fed had signaled its economic concerns. We consolidated that thinking recently by noticing how maturity walls may have an important effect on increasing transmission of Fed policy, which could change the dynamics. Now we want to talk about what's going on in Japan....
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DBJP: The Yen Can't Get Cheaper