Buy 'En' when cheap... Money Flows into Japanese ETFs

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Junho] As the Japanese yen falls to its lowest level in 24 years and yen depreciation intensifies, investment funds are pouring into Japan-listed exchange-traded funds (ETFs). It is analyzed that since the yen has fallen as much as it could, demand aiming for a rebound to gain foreign exchange profits is flowing into ETFs.

According to Daishin Securities on the 22nd, the top overseas ETF in terms of fund inflow from the 30th of last month to the 21st was the ‘TIGER Japan Nikkei 225’. A total of 120.8 billion KRW flowed in, ranking 5th overall. The fund inflow amount for this ETF was about 20 billion KRW less than ‘KODEX Inverse (140 billion KRW)’, which invests in the decline of the KOSPI amid recent increased volatility. Although the net assets of ‘TIGER Japan Yen Futures’ were only 12.1 billion KRW, net inflows relative to its size were strong.

This fund movement is analyzed to be a shift aiming for foreign exchange profits rather than expectations for the Japanese stock market. The returns of ‘TIGER Japan Nikkei 225’ and ‘TIGER Japan Yen Futures’ are 2.65% and -1.06%, respectively, recording relatively low returns among Japan investment ETFs listed domestically.

On the other hand, products like ‘KINDEX Japan TOPIX Leverage’, which also invest in the Japanese stock market, are recording the highest returns (6.06%) due to the rise in the Japanese stock market, but fund inflows were not larger than the aforementioned ETFs.

Kim Hae-in, a researcher at Daishin Securities, analyzed, "The fact that no significant net inflow appeared in Japanese leverage products with net asset sizes similar to yen futures ETFs indicates that the approach was made to seek foreign exchange profits rather than expectations for the Japanese stock market or economy." He added, "Expectations for the recovery of the yen value, which is at its lowest level in 24 years, are leading to fund movements."

Meanwhile, last month, the yen value against the dollar soared to 138 yen, falling to its lowest level in 24 years, but it is currently recovering to around 137 yen.