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An ETF for Weak Yen Winners and Losers


Plenty of exchange traded funds have benefited from the weak yen. The CurrencyShares Japanese Yen Trust (FXY) is down almost 12.1% this year, but the WisdomTree Japan Hedged Equity ETF (DXJ) has acted as an almost double-leveraged short yen play with a 26.8% year-to-date gain.

The iShares MSCI Japan ETF (EWJ) is up almost 19%. DXJ and EWJ are the top-two asset-gathering ETFs in 2013, but where there are winners, there are usually losers. South Korea, a direct export rival to Japan, is home to one of Asia’s worst-performing equity markets and the iShares MSCI South Korea Capped ETF (EWY) has plunged 15.6% this year. [Tapering Tumble for South Korea ETF]

Another ETF is chock full of stocks that have benefited and been hampered by the sliding Japanese currency. Fortunately for investors, the First Trust NASDAQ Global Auto Index Fund (CARZ) has done more winning than losing this year with a gain of 20%. CARZ, the lone auto sector ETF on the market today, has undoubtedly benefited from the discretionary group’s stellar performance, but the falling yen does not hurt. [Consumer Spending Boosts Retail ETFs]

Non-Japanese automakers such as Ford (NYSE: F) have not been shy about divulging their thoughts on the weak yen. South Korea has identified the falling Japanese currency as one of the two biggest risks to its economy. And Germany, the Eurozone’s largest economy and a major auto exporter, has also vocally criticized Japan’s currency policy.

The weak yen has not yet caught up with shares of Ford and General Motors (GM), which are up an average of 25% this year. Those two stocks are top-10 holdings in CARZ, combining for 13% of the ETF’s weight.

And while the U.S. accounts for 20% of the ETF’s country weight, Germany and South Korea combine for over 30%. The weak yen has enabled Toyota’s (TM) Lexus brand to offer more incentives, according to Bloomberg. With Lexus, “luring buyers” means pilfering prospective customers from German rivals such as Mercedes, BWW and Audi. The parent companies of those luxury brands combine for almost 19% of CARZ.

While Japanese automakers have played coy about the benefits of the falling yen, there is no denying the benefits. Toyota’s U.S. shares have surged 34.3% year-to-date. Nissan recently posted monthly sales that were triple the daily average. That is good for CARZ, which features Toyota and Honda (NYSE:HM) among its top-five holdings.

CARZ may not be a Japan ETF, but 10 of its 38 holdings are Japanese firms. At 35.7%, Japan is by far the fund’s largest country weight, highlighting the usefulness of CARZ as a weak yen play.

First Trust NASDAQ Global Auto Index Fund

ETF Trends editorial team contributed to this post. Tom Lydon’s clients own shares of DXJ.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.