EWJ’s industry-wise return
On November 19, 2015, banking, transportation, retail, insurance, and electronics were the five major industries that closed on a positive note. Many other industries closed on a positive note, but according to the weight in the fund, these were the top five outperformers. The bottom three industries were real estate, telecommunications, and auto manufacturers.
Banking industry headed EWJ
The banking sector provided a weighted return of 0.09% and an individual return of 29%. The highlight of the day was that all banks of the iShares MSCI Japan ETF (EWJ) earned a positive return, which gave the banking industry a huge gain in a single day.
However, due to the loss in the auto manufacturers industry, which has a heavy weight in EWJ, the performance of the ETF dragged, and it closed on a flat note. Stock for auto manufacturer Toyota (TM) had a return of -1.9%. Banking stocks such as Fukuoka Financial, Shizuoka Bank, and Suruga Bank rose by 2.8%, 2.2%, and 2.1%, respectively, on that day.
Importance of the interest rate
The financial sector always stands to be affected the most at the time of a monetary policy review. The Bank of Japan (or BoJ) maintained its status quo on the key interest rate. In anticipation of a future rate hike, all the banking stocks rose and boosted the performance of the banking sector.
The top performer
Fukuoka Financial Group returned 2.8% on November 19, 2015. Fukuoka manages three subsidiary banks: Bank of Fukuoka, Shinwa Bank, and Kumamoto Bank. It provides services in corporate planning, treasury personnel decisions, risk management, and audit and compliance.
Moody’s, the global credit rating agency, upgraded the bank’s outlook to positive in the month of September. This news helped the bank provide positive returns over the month. The bank is trading now at 641 yen. Its 52-week high is 739 yen, and its 52-week low is 536 yen. Its current PE (price-to-earnings) ratio is 11.96. Its current PB (price-to-book) value is 0.70. It’s currently trading at 3.3%, 6.8%, and 1.5% above its 100-day, 50-day, and 20-day moving averages, respectively.
Other large capitalization banking stocks such as Sumitomo Mitsui Financial Group (SMFG), Mizuho Financial Group (MFG), and Mitsubishi UFJ Financial Group (MTU) also provided positive returns of 1%, 0.9%, and 0.15%, respectively.
To learn more, read the Market Realist series Trade Surplus Data Strengthened Japanese Equity.