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A Foreign Exchange Traded Fund Investors Should Consider

The Exchange Traded Fund with the fifth highest trading volume is the iShares MSCI Japan Index (EWJ). This fund is averaging over 22 million shares a day trading volume. Why all the attention? If you look for the funds with the highest percentage gains for the year, this fund is not one of them. If you look for the top gaining funds for the past month, this fund is one of the top gainers with a 10.45% gain for the month.

The long slumbering Japanese economy is now coming alive. After years of deflation this economy is finally waking up. For the last several years Japan’s unemployment rate has been above 5%. Finally the unemployment rate has dropped under that level. At the end of March the Japan’s unemployment rate was 4.1%

GDP in Japan is also growing. Their 4th quarter year over year growth was 5.4%. This places Japan as one of the hottest growing economies for developed countries in the world.

Japan has had a decade and a half of rolling recession. During that recession many Japanese companies have hoarded cash. That means there are many asset rich companies that are ripe for restructuring. As a result merger and acquisition activity is strong. Last year was a record year in this category.
Up until this point there was a great deal of enthusiasm for emerging market stocks. In the past year this market has soared and it appears that this market may be overdone. Not as much money is flowing into emerging market funds now.
On the other hand, Japan, which is far from an emerging market, is seeing an improvement in its economy. This mature asian market is now drawing more investors.

Last year was the year of the energy and emerging markets. Perhaps this year will be the year of the mature Asian Market. There does not appear to be room for a major ralley in emerging markets at this time and US markets are still sluggish. AS investment money gets redistributed around the world, it is a good bet that a portion of it will find its way into the Japanese markets.

For those who are technical chart readers this Exchange Traded Fund’s indicators are all in positive territory. There fund has moved almost straight up from the beginning of March through the first week of April. When a fund moves in this manner there is bound to be some profit taking. As the profit taking occurs, for those already invested in this fund, this should not be of major concern unless you see the price drop below 13.80. For those who are not invested in this fund, you may want to consider buying during the price corrections.

Andrew Goldman is president of Metal Rabbit media services, the operator of He has written a number of articles on finance and investment over the last ten years.