INDEXCHANGE has received a licence for an ETF on the Nikkei 225 and will be the first such provider outside Japan.
Japan, the superstar of the 80s, appears to have left its low point behind. After a long period of stagnation that followed the bursting of the speculative bubble at the beginning of the 90s, signs now point to an upturn in the Japanese economy and in the equities market there.
The Nikkei 225 is Japan's best-known and oldest index. The Nikkei 225 has been calculated since 1950. Like the Dow Jones, the Nikkei 225 is a price-weighted index that is based on the prices of the individual equities.
Gotz Kirchhoff, CIO of INDEXCHANGE, said: "The Japanese newspaper publisher Nihon Keizai Shimbun, which calculates and publishes the index, has granted INDEXCHANGE the licence to be the first provider of an ETF on the Nikkei 225 outside Japan".
The ETF Nikkei 225¨EX (ISIN: DE000 A0H 08D 2) carries an annual management fee of 0,5% and offers efficient access to the Japanese stock market. It can be traded via Xetra on the Frankfurt Stock Exchange. Furthermore the fund is compliant with the European UCITS III Directive.
"The Nikkei 225¨EX is especially well suited to reflect the overall performance of the Japanese economy in a highly liquid way", explains Kirchhoff. This is because, in contrast to other well-known indices, the Nikkei 225 pursues the specific goal of representing Japan's industrial structure broadly with only the most liquid equities of the 36 industrial sector out of the so-called First Section of the Tokyo Stock Exchange.
As a result, numerous companies from traditional sectors such as fishing, textiles, paper goods and shipbuilding have a firm place on the Nikkei 225. Yet forward-looking sectors like telecommunications, information technology and consumer electronics will never be left out of the index in high-tech Japan.
The enormous variety of sectors on the Nikkei 225 distinguishes it from other well-known indices. But only the 450 most liquid companies of the around 1,700 companies in the First Section have a chance to be included in the Nikkei 225. Each year in October, the index reviews and adjusts the composition of the index. As a result of the detailed calculation of the Nikkei 225, the index reflects developments on the Japanese equity market very accurately and is always up-to-date.
Together with the US and Europe, Japan has long been the third centre of the global economy. But Japan's economy does not move in lockstep with the other major economies of the world. "The Nikkei 225 demonstrates low correlation to the DJ EURO STOXX and the S&P 500", explains Kirchhoff, illustrating the diversification potential of the ETF for a portfolio. The correlation to the DJ EURO STOXX is 0.43 and the correlation to the S&P is 0.39. By way of comparison, the correlation between the DJ EURO STOXX and the S&P 500 is 0.76.
However, the Japanese market offers investors more than just the opportunity to distribute their investments on global markets and to reduce risk concentration. Japan is widely viewed as being at the beginning of a long-term economic recovery. Deflation is steadily weakening as domestic demand rises. The change in Japanese interest-rate policy is also seen as a positive sign. In March, the Bank of Japan announced that it was ending its policy of low interest rates. At the same time, continuity in economic policy and further reform lend support to a sustained upturn in the Japanese economy.
Background note: INDEXCHANGE Investment AG was founded October 27, 2000 as subsidiary of HypoVereinsbank, operating independently. Its only business purpose is to design, launch and market Exchange Traded Funds (ETFs). On 3 January 2001, the first three INDEXCHANGE ETFs were listed on the German stock exchange. With a broad product range of currently 71 ETFs on various stock and bond indices and more than 13 bn Euro assets under management, INDEXCHANGE is a leading player for ETFs in Europe. No front-end fee is charged for trading INDEXCHANGE funds on the stock exchange. The annual management fee for the funds amounts from 0,09% to no more than 0.6%.