Bank of Japan stimulus boosts ETFs
Investors tracking Japan in the past month will have seen a very welcome change in fortune. While the country has been subject to much "China versus Japan: which will be the winner in 2013?" debate in recent months, the consensus has tended to be a clear answer of "China".
But those commentators may be about to be proved wrong.
The Bank of Japan met for the first time under its new governor in April and the outcome was better than many experts had dared hope. Governor Haruhiko Kuroda revealed some changes to monetary policy that will, it is intended, finally put an end to deflation. In response to the announcement equities rocketed while the currency plummeted.
Although many commentators are questioning the ability of the Bank of Japan to actually achieve a 2% inflation target within two years, and others point out that a rise in equities coupled with a fall in currency leaves local investors where they started, the fact that Japan is looking to tackle its problems head on is being viewed as a good thing. And investors holding a Japan exchange traded fund will likely agree.
The second, third and fourth best-performing trackers this month are those with a Japanese focus, and each returned 9% in March. However, just one has made it into the top 10 over a six-month period, and that is the iShares MSCI Japan Monthly Hedge ETF (IJPH), which has risen 41% over that period.
While the recent appeal of the country is undeniable, its lack of long-term performance does serve as a warning to investors not to get overexcited just yet. Those who have a strong conviction about Japan may have done better in an active investment fund. The Nikkei index has grown 30% over the year to date, to its highest level since 2008, and some active fund managers may have been able to add extra value.
At the other end of the scale, investors thinking that the FTSE 100's (UKX) run of success was already over may have been left disappointed as ETFs shorting the index have produced negative returns. The ETFX FTSE 100 Super Short Strategy 2x (SUK2) features as one of the worst performers in April, losing its investors 6%. It has fared even worse over six months, with a loss of 24%. The index may have pulled back slightly after reaching a high of 6533 mid-March, but the confidence is proving resilient.
The same too can be said for those funds trying to anticipate a reversal in the fortunes of Germany's Dax. The db-x short Dax x2 and ETFX Dax 2x Short (DES2) both lost 9% over the past month, and 12% and 13% respectively over the past six months. Germany's economy may not be blowing the lights out but it is still widely regarded as the mainstay of the eurozone.
In the commodities world natural gas has had a strong month, no doubt helped by the growing US commitment to fracking. The three top-performing exchange traded commodities this month are all focused on the energy source, having returned 11 or 12% in March.
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