A lot of attentions were drawn to the Japanese equity market recently since the news about Berkshire's investment spread out around May.
For almost 30 years, the Japan market has been silently dead. However, there are quite some dramatic changes starting around Feb 2023. It is time to re-consider the Japan market in the investment portfolio. This could be the start of a long recovery cycle in history, and right now it is a good opportunity.
Since the sino-US relationship change which started a few years ago, a lot of foreign investment are leaving the China & HK market, and we are talking about a large volume here. Where will these investment go? If these investments are still focusing in Asia, the only 2 countries that can be considered is Singapore and Japan. The Singapore economy is very small, much smaller than HK. Japan naturally becomes one of the possible focus. This probably marks the up-side of the Japan market.
There are 5 specific companies Warren Buffett has invested in Japan, namely:
NB. click on the above links and select '1 year' on the bottom to see their growth and trends
Looking at the Nikkei 225 index, it has a sharp rise since Feb 2023, same as these 5 equity stocks.
There are different ways to consider investment in the Japanese market:
| 1 | Follow Warren Buffett's investment | Purchase individual stocks listed above. These stocks are listed in Tokyo Stock Exchange. You need a suitable investment account to do that. Note that investment will be made in Yen. At the time of this article, USD/YEN is at around 140, and Yen is on the low side. Lowest exchange rate in history was 147-150. For a long term investment, this exchange rate is beneficial to the investors. |
| 2 | MPF | Switch MPF portfolio to include Japanese Equity market. The portfolio in ManuLife MPF under the 'Global Select Scheme' is SHK131. There should be similar funds available in other service providers and schemes too. |
| 3 | ETF | There are some US-based ETFs which invest into the Japanesse market which operates as funds but distributed as shares and can be bought in the stock market. Most of the ETFs distribute dividends semi-annually. Investing in ETF seeks returns from both dividends and price appreciation. Below is a list of the ETFs that can be considered. |
ETFs for Japan Market
| EWJ | iShares MSCI Japan ETF | EWJ has been used as an indicator for the Japanese market. It is very popular, and follows well the Japan Equity market. Transaction volume is high, and very popular in the market, with high liquidity. |
| HEWJ | iShares Currency Hedged MSCI Japan ETF | The hedged version of EWJ, with much lower transaction volume compared with EWJ. However, transaction volume is still high compared with other ETFs. |
| BBJP | JPMorgan BetaBuilders Japan ETF | One of the ETF that can be considered with sufficient trading volume. |
| IVLU | iShares MSCI Int'l Value Factor ETF | One of the ETF that can be considered with sufficient trading volume. |
| DXJ | WisdomTree Japan Hedged Equity Fund | One of the ETF that can be considered with sufficient trading volume. |
| FLJP | Franklin FTSE Japan ETF | One of the ETF that can be considered with sufficient trading volume. |
| FLJH | Franklin FTSE Japan Hedged ETF | One of the ETF that can be considered with sufficient trading volume. |
| EWJV | iShares MSCI Japan Value ETF | Low trading volume which can be difficult to sell during the down cycle |
| EZJ | ProShares Ultra MSCI Japan ETF | Low trading volume which can be difficult to sell during the down cycle |
| DBJP | XTrackers MSCI Japan Hedge Equity ETF | Low trading volume which can be difficult to sell during the down cycle |
| VJPN | FTSE Japan UCITS ETF | This ETF is listed in the London Stock Exchange and traded in £. It is placed here for information only for the convenience of those in the UK. |
Ref: Japan ETF List in the US market
For investment in ETFs, the following should also be noted:
- Trading volume - liquidity will be much higher with those with a higher trading volume. That means there will be much more transactions every day in the market. That means it will be easier to sell the ETFs when needed. Some small volumes can be only a few thousand per day, but the high ones are over a million.
- When the Yen is low, whether or not it is a Hedged fund is not significant. Hedged funds are funds with additional arrangement to prevent loss from foreign exchange, probably by borrow Yen to invest into the Yen equity market. Additional cost will apply.
- Some ETFs have high expense ratio up to 0.5%, which is the management fee for the fund management team. In general, more reasonable ratios are around 0.15%. However, even the highest cost of 0.5% is much much lower than most MPFs in HK, which amount in average around 1.5% ~ 2%, 3-4 times higher.
Declaration
The author is not a licensed investment brokers or expert. This article is purely a sharing of his personal opinion with his family and fellow friends. This is not a recommendation for investment. The author also has investment in this market personally, with some experience in the investment platform of InteractiveBrokers, which is also registered in Hong Kong, and is probably the transaction platform with lowest transaction fee worldwide.
If you are interested, you're welcomed to get more experience from the author.
Commentaries on YouTube
Below are more comments from different speakers on YouTube as a reference. Interested parties should make their own research and judgement on this opportunity.
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