Japanese ETFs and ADRs down with the market on August 24
The iShares MSCI Japan ETF (EWJ) dipped 3.7% at the August 24 close, although the Markit Economics’ Japan Manufacturing PMI report showed improvement in industrial sector conditions in June. The WisdomTree Japan Hedged Equity Fund (DXJ) also slid 6.9%. These Japan-tracking ETFs have yielded 2.31% and -1.65%, respectively, on a year-to-date basis.
Japanese companies’ ADRs (American depository receipts) were also down. Sony (SNE) was down 5.14%, the Mitsubishi UFJ Financial Group (MTU) slid 6.50%, and Honda Motors (HMC) was down 4%. These ADRs have yielded 13.58%, 9.22%, and 2.47%, respectively, year-to-date.
Markit Manufacturing PMI improved in August
The flash reading for the Japan Manufacturing PMI was up for August. The index came in at 51.9 for August against July’s 51.2. The preliminary reading for the Japan Manufacturing Output Index stood at 51.9 in August against July’s 52.2. Data released on August 21 was compiled from data collected from August 12 to August 19. The final PMI figures for June will be released on September 1, 2015.
The report indicates that new order growth accelerated in August. Employment and output also increased, albeit at a slower pace. According to the report, “New order growth accelerated to the second fastest this year so far, while production increased at a similar pace to July’s five-month record. In contrast, new orders from abroad rose at a slower pace, with reports of reduced sales volumes with China dampening international demand.”
Up to now, new export orders have been fueled by a cheaper yen. The cheaper yen has also helped boost foreign demand for the country’s products. However, with the situation in China getting grimmer by the day, Japanese exports are bound to be affected.
Japanese equities are resilient
Japan has been outperforming all major markets so far this year. The EWJ has yielded a 2.14% return to its investors versus Europe’s (VGK) -4.46% and the US’s (SPY) -7.78%. Please read Can Japan’s Stock Market Sustain Such Growth? for our detailed analysis on the topic. Markets across the globe have tumbled in the wake of China’s stock market crash. Japanese equities are still proving to be more resilient than others facing the repercussions.
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