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 Reports and Commentary from the Investment World

Reports and commentaries are posted here on a regular basis.


MSCI Japan Index Fund


MSCI Japan Index Fund. (EWJ:AMEX) 2005-09-24

After years of stagnation and zero interest rates, the Japanese economy seems to have finally turned the corner.

The OECD, a think tank that comprises 30 leading countries committed to democratic government and market economy, just increased the 2006 growth estimate for its member countries. The organization includes the U.S.A  the main European countries, Japan and Korea. Japan has decidedly moved forward toward deregulation, with the bold move by Prime Minister Junichiro Koizumi to press on with the privatiza­tion of the Japanese postal service.

This entity holds about 25 % of the savings of individuals in Japan, in the form of savings accounts and insurance policies. These savings are currently being used to finance government projects that typically have a very low rate of return. By privatizing the postal service, these savings will be available for investment in much higher-returning private projects on a competitive basis, therefore greatly increasing the productivity and growth of Japan.

Japan is also benefiting from its proximity to China and a dramatic turnaround in its banking industry.
Bad loans in the Japanese banking system, a huge impediment to growth in the past, have shrunk by more than US$50 billion in the last 12 months. As debtors’ ability to repay improves and bad loans drop, the banking system’s capital­ization increases, allowing for loan grow to pick up, which in turn stimulates further growth.

Japan is at the very beginning of its turnaround cycle, powered by deep structural reforms, continued low rates and free trade, which should continue benefiting the country for years.

The best way to take advantage of a resurgent Japanese market is to buy the ETF (exchange traded fund) MSCI Japan Index Fund. You get a basket of the best stocks in Japan, in one trade.

The investment seeks to provide investment results that correspond generally to the price and yield performance of publicly traded securities in the Japanese market, as measured by the MSCI Japan Index. The fund normally invests in stocks that are primarily traded on the Tokyo Stock Exchange, using a sampling strategy to try to track its index. This fund is nondiversified.

The Top 10 holdings are: Toyota, Sony, Mitsubishi Financial Group, Nomura Holdings, Sumitomo Mitsui Financial Group, Takeda Chemical Industries, Honda Motors, Canon, Matsushita Electrical & Mizuho Financial. The holdings are heavily weighted to the industrial materials sector, financial services sector and the consumer goods sector.

The ETF is a cost and tax efficient vehicle, which trades like one share. The fund has over US$1 billion in assets. Barclays Global Investors’ iShares family remains the biggest of the ETF groups and iShares MSCI (EWJ:AMEX) has been a hot seller.

Buy the MSCI Japan Index Fund (EWJ:AMEX) today to follow the upward movement in the Japanese market.


Disclaimer: All the information above is provided as a service for individuals and institutions. It should in no way be construed as a recommendation as an investment. Investment decisions should be based on the risk tolerance and planning horizon of the investor. Market participants must understand that past performance is also not a guarantee or predictor of future results.