Japan ETFs Lure Record Investment Amid Fight to Prevent Nuclear Meltdown
Exchange-traded funds that invest in Japanese equities lured record inflows last week after an earthquake, tsunami and radiation leak at a Tokyo Electric Power Co. nuclear plant drove the biggest slump since 1987, according to TrimTabs Investment Research.
Seven funds with more than $6 billion in assets tracked by the Sausalito, California-based researcher received an estimated net $1.21 billion in money between March 14 and March 18, the most since at least 1996. Investors bought after companies in Japan’s Nikkei 225 (NKY) Stock Average sank to the lowest valuation based on net assets since March 2009, Bloomberg data show.
The inflows show “what the underlying mentality investors have at the moment, which is quite bullish,” Minyi Chen, Asia equity analyst at TrimTabs, said in an interview. “The drop provided an excellent opportunity for any buyers who were hesitant to buy before.”
The Nikkei 225 sank 16 percent in two days at the start of last week following the 9-magnitude earthquake that was the largest in recorded history in the world’s third-largest economy.
Japan’s government estimated the damage from the March 11 quake and tsunami at as much as 25 trillion yen ($309 billion), an amount almost four times the hit imposed by Hurricane Katrina on the U.S. The Bank of Japan has injected 40 trillion yen of cash to help prop up the economy. The Group of Seven sold yen to prevent the currency’s appreciation, which threatened to drive Japan into recession.
Quickly, Aggressively
The ETFs attracted an estimated $700 million on March 16 as the Nikkei rebounded 5.7 percent, according to TrimTabs data. That was a record one-day inflow.
“To its great credit, the Bank of Japan acted quickly and aggressively,” New York-based Chen said. “Market participants have fast grown a much healthier appetite for risk.”
The iShares MSCI Japan Index Fund (EWJ), one of the seven securities tracked by TrimTabs, received about $1.1 billion, Chen said. Japanese stocks have been higher three months later in 66 percent of the times when that fund received monthly inflows of at least $100 million, the analyst said.
Other funds included the SPDR Russell/Nomura Prime Japan ETF and the WisdomTree Japan SmallCap Dividend Fund. (DFJ)
To contact the reporter on this story: Alexis Xydias in London at axydias@bloomberg.net.
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
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