Japan Funds Jump, But India Funds Flop

As Japan's Kibo lab is being delivered to the International Space Station by the U.S. space shuttle Discovery, the geographically focused funds specializing in Japanese stocks outperformed all other countries and regions for the week ended Thursday, June 5.

At the same time, Indian funds dominated the worst-performing list due to turmoil over a hike in the price of gasoline, diesel fuel and liquefied petroleum gas by the Union government. Competing political parties are planning to make trouble with shutdowns on June 10 to protest the higher prices.

With a one-day jump of 10.97% in gasoline and 9.43% in diesel, prices at the pump skyrocketed. Three Indian states, West Bengal, Kerala and Tripura, reacted by going out on strike, shutting down the container port of Kochi. The government warned that more price hikes should be expected, as subsidizing the cost of crude oil can't be sustained, even at the new price level.

Meanwhile, Japan is pushing ahead in technology and innovation. Not only did Japanese auto maker Toyota Motors(TM Quote) just announce a 516-mile-range hydrogen fuel-cell vehicle and a J.D. Power award, but Sapporo Breweries teamed with Okayama University to make "space beer" from barley that had been on board the International Space Station for five months.

The best-performing geographically focused fund for the week ending Thursday, June 5, is the Japan Smaller Capitalization Fund(JOF Quote). This closed-end fund gained 7.90% for the period on gains of 23.44% in Eagle Industry, 22.20% in O-M Ltd, and 17.14% in Exedy Corp. The fund's holdings have a weighted average market capitalization of $1.22 billion.

In second place is the ProFunds UltraJapan ProFund(UJPIX Quote), which added 4.63%, targeting 200% of the performance of the Nikkei 225 Stock Average, with index futures contracts traded on the Chicago Mercantile Exchange.

Some of the largest gains of the index members came from Japanese auto makers, with Mazda Motor(MZDAF Quote), up 16.37%; Honda Motor(HMC Quote), up 13.39%; Mitsubishi Motors(MMTOF Quote), up 13.26%; and Toyota Motor up 7.71%.

The big news here is the economical Honda Civic knocking off Ford Motor's(F Quote) F-series truck as the best-selling U.S. vehicle.

Toyota Motor is the top holding of the third-place fund, Fidelity Advisor Japan Fund(FAJCX Quote).

After Toyota at 7.4% of assets, the next largest holdings are Canon(CAJ Quote) at 5.8%, and Sumitomo Mitsui Financial Group(SMFJY Quote) at 4.5%.

Best Performing Geographically Focused Funds for the Week Ending Thursday June 5
Fund	Ticker	Rating	Fund Type	1 Week Total Return
Japan Smaller Capitalization Fund Inc	JOF	E	Closed-End	7.90%
ProFunds UltraJapan ProFund	UJPIX	E	Open-End	4.63%
Fidelity Advisor Japan Fund	FAJCX	D-	Open-End	4.57%
Fidelity Japan Fund/United States	FJPNX	C-	Open-End	4.51%
Henderson Japan-Asia Focus Fund	HFJAX	U	Open-End	4.31%
Japan Fund Inc/fund	SJPNX	C	Open-End	4.19%
AIM Japan Fund	AJFAX	U	Open-End	4.00%
Japan Equity Fund Inc	JEQ	C	Closed-End	3.87%
Oppenheimer Baring Japan Fund	OBJAX	U	Open-End	3.81%
DWS Japan Equity Fund	FJEAX	E+	Open-End	3.75%
Source: Bloomberg & TheStreet.com Ratings

While all 10 funds on our best-performing geographically focused list are Japanese, seven of the 10 worst-performing funds centered on India.

The unwelcome price hikes in fuel hit India at a difficult juncture. Wholesale inflation at 8.24% year over year is at its highest point since August 2004, consumer inflation is back up to 7.87% nearing its June 2006 high, and manufacturing growth was reported at the slowest level in 10 months.

Topping the worst-performing list this week is EM Capital India Gateway Fund(EMINX Quote), off 4.99%. As this is a relatively new fund that began trading back on July 23, 2007, there is little information publicly available.

In my interview with the fund's CEO & Managing Director Seth Freeman, he filled in some of the blanks on types of well-managed, profitable, fast growing companies his fund targets and how the Gateway fund differs substantially from the other India-focused funds currently available. The decline in value this week was attributed to a bad week in a heavily weighted sector of infrastructure construction, blamed on contamination from the U.S. "subprime" liquidity crisis.