Bloomberg Market Specialist Adam Lynne contributed to this article. The original version appeared first on the Bloomberg Terminal.
Background
Aggregated fund inflows into the Topix Index have been rising since mid-March, when the Japanese stock market was battered by bank failures in the U.S. and Europe. Income strategies are among those that have attracted the most funds in 2023, with dividend and value stocks beating the benchmark index.
Meanwhile, the Topix and the Nikkei 225 Stock Average recently achieved their longest string of consecutive gains in a year. Berkshire Hathaway’s Warren Buffett recently expressed interest in increasing his exposure to Japanese stocks, highlighting the country’s attractive investment opportunities.
Buffett’s remarks “may encourage foreign investors to invest in Japanese stocks, especially in value stocks,” said Hiroshi Namioka, chief strategist at T&D Asset Management.
The Issue
The March meltdown pared gains in the Topix Index to 4.4% in dollar terms for the year. By comparison, the S&P 500 Index has a year-to-date gain of 6.6%, and the Stoxx Europe 600 Index is up 12%. At a global level, the International Monetary Fund recently trimmed its global growth projections, warning of risks as financial-sector stress adds to pressures caused by tighter monetary policy.
There are 27 ETFs tracking the Topix Total Return Index and the Topix Net Total Return Index, with BlackRock Inc.’s iShares Core TOPIX ETF attracting the most flows over the past three months.
Investors have been allocating toward equity income and income large cap strategies in 2023, while equity large cap and other thematic plans have seen small inflows or net outflows. The inflow leader is NEXT FUNDS Nikkei 225 High Dividend Yield ETF, which offers high dividend yield, momentum and value compared with the TOPIX Index.
The iShares MSCI Japan High Dividend ETF has lower dividend yield and value exposure than the Nikkei 225 Dividend Yield ETF but scored higher in areas of quality, low volatility and size. Those characteristics, however, haven’t fared as well as value and dividend yield in 2023.
Looking ahead from a long-only perspective, high value and dividend yields have both outperformed the Topix Index, while quality, low volatility and size have lagged.
Tracking
Use Bloomberg’s GP, DES, ETF, FTW and new TLTS function to analyze the assets, exposures, and performance of exchange-traded funds. GP provides aggregated flows to the Topix index, while DES offers transparency of the funds behind the flows by finding funds and ETFs following the Topix index or derivatives of the index. Using ETF allows you to see which strategy is thriving amid improving fund flows across Japan.
The new TLTS function can be used to analyze funds by diving into factor exposures. FTW enables you to see the performance of the factors within the market. In this example, click the Next Funds Nikkei 225 ETF line. Click TLTS – Tilts in the popup. The shortcut is 1489 JP Equity TLTS <GO>.
For more information on this or other functionality on the Bloomberg Professional Service, click here to request a demo with a Bloomberg sales representative. Existing clients can press <HELP HELP> on their Bloomberg keyboard.
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