Making Money Alert
ETF Talk: Rising Again with Japan
07/20/2011
The SPDR Russell/Nomura Small Cap Japan Fund (JSC) is an exchange-traded fund (ETF) that gives you a chance to profit from the Japanese efforts to rebuild from the nation’s recent catastrophes. As I have written previously, the Japanese people have shown admirable resiliency in their efforts to overcome the woes of a major earthquake, tsunami and nuclear power plant disaster.
Just because Japanese stocks have not soared does not mean that they will not recover strongly from the pullback that they endured immediately following the disasters. The markets generally seem to have been weighed down by international macro economic issues during the past few months. Nonetheless, I believe this ETF has the potential to jump as Japan continues its recovery efforts after the devastating earthquake and tsunami that struck March 11.
The JSC SPDR Russell/Nomura Small Cap Japan Fund has performed better than the broadly tracked U.S. markets, since I recommended the fund in my ETF Trader service on April 28. Since that recommendation, JSC has risen 7.22%, easily besting the 2.48% decline of the S&P 500 through yesterday’s trade.
JSC is designed to represent the smallest 15% of stocks in the Russell/Nomura Total Market Index. This ETF should do particularly well in the post-tsunami period because its top sectors are skewed heavily towards industrials and consumer discretionary, 23.8% and 21.26%, respectively. Both sectors should benefit from post-tsunami spending by their customers. According to a BBC article on July 6, Japan’s cabinet approved $27.4 billion in disaster relief (almost ¥2 trillion) funds and much of the money has yet to be spent. Such spending should aid small-cap sized Japanese companies in the coming months.
While this fund may be volatile, it could be a good way to gain diversification because of its limited correlation to the U.S. equity markets. JSC also moved well above its 50-day and 200-day moving averages recently.
With the fund’s recent rise from its March lows, certain observers might argue that this Japanese-based ETF and others like it have moved too far, too fast. However, with JSC still below pre-tsunami levels, this fund still can be bought at a reasonable price to let you profit from the rebuilding taking place in Japan.
As money continues to flow from Japanese government reconstruction efforts, we expect that many of small and mid-sized companies will outperform in the coming quarters. In sum, the Japanese market, due to the post-tsunami reconstruction, is worth considering for at least a small investment.
Finally, if you want my advice about buying and selling specific ETFs, including appropriate stop losses, consider subscribing to my ETF Trader service. As always, I am happy to answer your questions, so do not hesitate to email me by clicking here. You just may see your question answered in a future ETF Talk.