Chinese retail investors are also cashing in on the downside by betting firmly on Japan as China’s stock market has given way after a bullish start to the year. What, according to many, was meant to be China’s year of reopening after Covid-19, is currently yielding mixed results due to China’s economic recovery is slower than expected and tension with the United States which disappointed investors with Chinese stocks erasing year-to-date gains. On the other hand, bright skies are shining in Japan as the Tokyo Stock Exchange has rebounded from a high in more than three decades and Warren Buffett which increased its allocation to the country of Japan which is now its second largest allocation after the United States.
Chinese retail investors have reacted strongly to reading the situation and in May, according to data from Mizuho Securities Co., it significantly increased the equity exposure made in Japan: assets under the management of China AMC Nomura Nikkei 225 ETF increased almost 300% in the end. month to 213 million yuan ($29.8 million), while that of the E Fund Nikko Asset Management Nikkei 225 ETF jumped 236% to 171 million yuan. Both funds “have grown on investment from retail investors,” explains Mizuho.
The Nikkei 225 index rose about 7% in May compared with a 5.7% drop in China’s CSI 300 index.
Clones put themselves in Japan
There are many options for retail investors to take broader exposure to Japanese stocks. Japan’s ETF market, which has a value of 60 trillion yen, is dominated by ETFs indexed to Topix and Nikkei 225, while European ETFs with MSCI Japan being the basis of the number, an index that boasts good diversity and the presence of approx. 240 stocks in it, compared to 225 of the Nikkei index, while Topix includes about 2,000 stocks.
Inside of’index MSCI Japanwhich since the beginning of the year represents a high of almost 15%, the stock with the largest weight is Toyota with 4.3% (data at the end of May 2023), followed by Sony (3.53%), Keyence (2.80%) and Mitsubishi UFJ Financial Group (2.37%).
OPPORTUNITY FOR YOU.
China or Japan, who should you give more room in your wallet?
What are the Asian Equity Extended Exposure Funds or ETFs?
Wealth’s handpicked experts can help you find the answers you’re looking for.
ASK FOR YOUR FREE CONSULTATION