Approaching the final quarter of 2023, investors can look back on most of the year and assess which investments have performed. With new ETFs arriving all the time, the space presents more options than ever. One particular standout ETF may merit more attention, however, in the form of Japan ETF DXJ. Not only does DXJ present a strong investment case right now, it also looks set to benefit from growing trends. Taken together, it may be a strong candidate for investors.
(DXJ ), the WisdomTree Japan Hedged Equity Fund, has returned 43% YTD and has returned 48% over the last one year. That not only outperforms its FactSet Segment and ETF Database Category averages, but also stands out among all ETFs. It recently crossed the $3 billion AUM threshold, too, having added $1.2 billion in AUM over the last year. The fund charges an expense ratio of 0.48%.
So how has the Japan ETF put together those numbers? Its focus on the country has offered exposure away from an expensive, uncertain U.S. stock market. Instead, investors have had access to the WisdomTree Japan Hedged Equity Index.
See more: ETF of the Week: WisdomTree Japan Hedged Equity ETF
Factors Boosting a Japan ETF
That index “hedges” out the impact of the yen’s changing value while still offering exposure to equities that can benefit from the yen’s weakness. At the same time, DXJ benefits from the so-called “carry” effect caused in part by the gap in U.S. and Japanese interest rate. The Japanese government appears to be eyeing stimulus, while global inflation has actually somewhat helped to reheat a Japanese economy that has faced long-term “deflation.”
What’s more, the Japanese government looks set to reform the tax-exempt investment program Nippon Individual Savings Account (NISA). Similar in some ways to U.S. 401(k) schemes, reforms to NISA could increase domestic investment into Japanese stocks to match foreign interest.
Investors have a lot of ETF options to consider, but a Japan ETF could offer an interesting way to serve uncertain U.S. stocks. Whether for how expensive they are, or for the looming, ongoing challenge of rate hikes, investors may want to take a closer look at DJX.
For more news, information, and analysis, visit the Modern Alpha Channel.
