Japan's Rising ETF Plays

Two Adds From State Street

In the last couple of weeks, State Street Global came out with two Japan ETFs of its own, a large-cap and a small-cap fund that are based on indices from Russell/Nomura.

Because they are brand new, about the only thing to look at is the composition of the funds. The large-cap fund, the StreetTracks Russell/Nomura Prime Japan ETF(JPP), looks similar to the iShares large-cap funds. Toyota is the largest holding followed by a bunch of bank stocks with Honda Motor in the mix as well. Consumer discretionary, or consumer cyclicals, is the largest sector at 21% followed very closely by the financials at 20%. For now, there is no dividend information, but looking at the top 10, which accounts for 20% of the fund, I would expect the yield to be lower than those of the WisdomTree funds.

The other fund from State Street is the Russell/Nomura Small Cap Japan ETF(JSC). In comparing it with the WisdomTree small-cap fund, there is not a lot of stock overlap, which is normal when looking at different small-cap funds. The sector weights are similar -- both have the largest weighting in industrials at roughly 27%, followed by consumer cyclicals at close to 23%. From there it mixes up a little with tech having a 13% weight in JSC compared with only 4% in DFL. This gives JSC a little more of a growth bias. The fact that DFL is more value-oriented should be expected, as it is dividend-weighted.

For now, State Street's large-cap offering may not be much different, but the small-cap fund does seem like it could offer something different from what WisdomTree does.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider WisdomTree Japan Total Dividend Index Fund, WisdomTree Japan High-Yielding Equity Fund, WisdomTree Japan SmallCap Dividend Index Fund, streetTracks Russell/Nomura Prime Japan ETF and Russell/Nomura Small Cap Japan ETF to be small-cap stocks. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

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