The Nikkei Index sprinted to 40,000 points! Buffett is betting on the top five trading companies to make $8 billion. Which Japanese stock ETFs are worth deploying?

Futu News ·  Feb 26 14:45

As overseas investors further poured into the Japanese market, pushing the Nikkei 225 Index to break the 34-year record high in the dust last week, it now seems that there is room for further progress...

By the close of trading on Monday, Japanese stocks had further broken the all-time high record set last Thursday.$Nikkei 225 (.N225.JP)$It closed at 39233 points, surpassing the Dow Jones index for the first time in 8 years.

And as Japanese stocks returned to their peak, “stock god” Buffett also won.

On the evening of February 24, Buffett revealed in an annual letter to shareholders that Berkshire currently owns 5 Japanese trading companies ($ITOCHU (8001.JP)$,$Marubeni (8002.JP)$,$Mitsubishi (8058.JP)$,$Mitsui (8031.JP)$und$Sumitomo (8053.JP)$) Close to 9% of the shares.

Currently, Berkshire's investment costs for these five companies total 1.6 trillion yen, and the year-end market value of the five companies is 2.9 trillion yen. As the yen depreciated in recent years, Berkshire's year-end unrealized dollar earnings were 61%, or $8 billion.

Notably, 92-year-old Buffett said in a shareholder letter that he will continue to hold shares in the five major trading companies for a long time. He previously revealed that Berkshire plans to hold these investments for 10 to 20 years.

Why invest in Japanese stocks?

Mitsui & Co., Ltd., Mitsubishi Corporation, ITOCHU Corporation, Sumitomo Corporation, and Marubeni Corporation are known as Japan's “Big Five Trading Companies”. They are a long-standing, large-scale enterprise group that plays an important role in the Japanese economy.

These companies are characterized by a highly diversified business, trading in various products and materials involving natural resources, energy, chemicals, metals, manufacturing, retail, real estate, and healthcare, helping the Japanese economy move to the global stage.

As can be seen from the stock god's description, diversified business, high dividends, high free cash flow, and prudent issuance of new shares are important reasons why Buffett invests in the five major trading companies. It says,

The five major trading companies in Japan all operate in a highly diversified manner, which is somewhat similar to the way Berkshire itself operates;

All five companies have followed a shareholder-friendly strategy. Since we began to acquire Japanese stocks, all five companies have reduced the number of tradable shares at attractive prices;

All five companies use only about 1/3 of their earnings for dividends, and the huge amount of money they keep is not only used to establish many of their businesses, but also to a lesser extent to buy back stocks. Like Berkshire, these five companies are reluctant to issue shares.

Is Nikkei starting to hit 40,000 points without stopping? Which ETFs are worth laying out?

After making history just last week, Japanese stock bulls have now begun to launch an impact on 40,000 points without stopping.

Many industry insiders said that the index is approaching the coveted level of 40,000 points. If it further breaks through this integer level in a short period of time, it may indicate more room for growth.

Within minutes of hitting a new high last Thursday, traders in the Tokyo trading room of Nomura Securities stood and applauded in groups. And Kentaro Okuda, the broker's CEO, now believes that even at such a high level, the Japanese stock market is still at a “buying point.”

Looking ahead to the future, further purchases by foreign investors may continue to be a potential driving force for the Japanese stock market. According to data compiled by the industry, capital flow data shows that trillions of yen of capital may return to the Japanese market in the future.

Compared to Hong Kong and US stocks, the Japanese market is relatively niche, and it is more difficult for investors to directly participate in the Japanese stock market. Investors who are interested in investing in the Japanese market but don't know where to start can use ETFs to participate. News Jun has compiled the following Japanese stock ETFs from the Hong Kong and US stock markets for reference:

Hong Kong Stock Market:

$ChinaAMC MSCI Japan Hedged to USD ETF (03160.HK)$

$Global X Japan Global Leaders ETF (03150.HK)$

$CSOP Nikkei 225 Index ETF (03153.HK)$

US stock market:

$iShares MSCI Japan ETF (EWJ.US)$

$JPMorgan BetaBuilders Japan ETF (BBJP.US)$

$WisdomTree Japan Hedged Equity ETF (DXJ.US)$

$JPMorgan BetaBuilders Developed Asia Pacific ex-Japan ETF (BBAX.US)$

$Japanese Yen Trust (FXY.US)$

$iShares Currency Hedged MSCI Japan ETF (HEWJ.US)$

$iShares MSCI Japan Value ETF (EWJV.US)$

$Japan Alphadex First Trust (FJP.US)$

$Ishares Jpx-Nikkei 400 Etf (JPXN.US)$

$Wisdomtree Japan Hedged Smallcap (DXJS.US)$

$Ishares Inc Msci Japan Small-Cap Etf (SCJ.US)$

$Franklin FTSE Japan Hedged ETF (FLJH.US)$

$WisdomTree Japan SmallCap Dividend ETF (DFJ.US)$

$Goldman Sachs ActiveBeta Japan Equity ETF (GSJY.US)$

$Matthews Japan Active ETF (JPAN.US)$

Newcomers can also search for [Japanese Stock ETF] in the search box to track more Japanese ETFs. They can also check the ETF fund page to learn about the top holdings of each ETF to use as a reference for investment decisions~


Cow friends,

Are you optimistic about the future trend of the Japanese stock market?

Welcome to leave your wonderful comments in the comments area~


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