Japan ETFs Fall in U.S. Market as Topix Drops Most Since ’11

Japanese exchange-traded funds, the most popular ETFs in the world this year, fell in U.S. trading as the Topix index posted the biggest drop since the aftermath of the March 2011 tsunami and nuclear disaster.

The iShares MSCI Japan Index Fund, the largest U.S. ETF of Japanese shares, slid 4.2 percent to $11.62 in New York for the biggest drop since 2011. The WisdomTree Japan Hedged Equity Fund, which saw assets rise sevenfold this year, sank 4.3 percent to $50.36. Both have received more cash than any other ETF in 2013. The Bank of New York Mellon Japan ADR Index fell as much as 7.2 percent for the worst drop since 2008.

“Everybody’s concerned about the market being overvalued and Japan in particular has had massive positive returns,” Greg Peterson, director of investment research at Ballentine Partners LLC in Waltham, Massachusetts, which manages about $4 billion, said by telephone. “People are ready to pull the trigger at any sign that any thing’s going wrong.”

About $314 billion was erased from Japanese market value today when the Topix tumbled 6.9 percent after a 48 percent surge this year on speculation that Prime Minister Shinzo Abe and the Bank of Japan would end two decades of deflation. For the first time since April 2005 every company in the Nikkei 225 Stock Average fell, dragging the gauge down 7.3 percent.

Nikkei 225 futures traded in Osaka were up 0.1 percent in the May 24 session. The yen strengthened against its 16 major peers, gaining 0.1 percent to 101.97 per dollar.

Stimulus Withdrawal

Factory output in China shrank for the first time in seven months, a report from HSBC Holdings Plc and Markit Economics showed. Fed Chairman Ben S. Bernanke told lawmakers yesterday a premature withdrawal of stimulus could endanger economic recovery as policy makers debated tapering the pace of bond purchases.

About 146 million shares of the iShares MSCI Japan changed hands today, the highest since April 11, according to data compiled by Bloomberg.

Toyota Motor Corp.’s American depositary receipts slid 2.5 percent to $124.66. Honda Motor Co. ADRs lost 2.5 percent to $40.24 and those for Sony Corp. fell 2.4 percent to $21.63.

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