As of June 2011, there are several exchange-traded funds (ETFs) listed on U.S. exchanges that invest in Japanese securities. However, none of them track the best known Japanese stock index, the Nikkei 225. In Japan, two such ETFs are already well established in the market: one by iShares and another by Nomura. Now, the first Nikkei index ETF to be listed in the U.S. has entered the last stages of preparation before its official start. We will take a look first at the Nikkei index itself, and then at the upcoming ETF.
The Nikkei 225 Index And the Japanese Economy
The Nikkei 225 is a stock market index comprised of 225 stocks of companies listed on the Tokyo Stock Exchange in Japan. It was introduced in 1950 and covers all sectors of Japan’s economy, updating its constituent stocks once a year. The Nikkei, as it is usually called, is the most important and best known Japanese stock index, comparable to the Dow Jones index in the U.S.. It is the broadest existing index of major Japanese companies and consequently very representative of the overall Japanese economy itself. Its unusual development in the past 30 years mirrors Japan’s economical trajectory: The Nikkei peaked at the end of 1989 and has since lost again over 80% of its value.
Investing in the Nikkei represents the most obvious way to participate in economical developments in Japan. Many troubling facts are responsible for the Nikkei’s drop over the last 20 years, among them the high national debt and Japan’s aging population. Still, a Nikkei ETF is a transparent way to participate in Japan’s most prestigious index. Those with a negative outlook on Japan need to look for other investment forms, as no short Nikkei ETF is currently existing or known to be in preparation.
The Nikkei 225 ETF
The planned Nikkei ETF mentioned above has just revealed the first pieces of solid information: It will be issued by Precidian Investments and will be called “Nikkei 225 ETF“, using the symbol NKY. Its expense ratio will be set at 0.50%. As this information has been released in early June 2011, its launch is expected soon afterwards.
However, keep in mind that this fund has not yet been officially released, therefore, information may still change before its actual start.