INVESTING ETFs FEATURE
30 September 2019
SIYABULELA NOMOYI Head: Index Management, Sygnia Group
How to gain access to top Japanese companies
F
or more than half a century, the Japanese economy has been one of the biggest and most advanced in the world, built on the growth of local companies that have successfully manufactured and exported high-quality goods across the globe. These corporations include household names such as Toyota, Sony, Mitsubishi, Nintendo and Panasonic – market leaders in their respective industries for many years. These firms have maintained their positions through high levels of spending on research and development to keep them at the forefront of technological advances. The Sygnia Itrix MSCI Japan ETF provides investors with access to a diverse range of these companies through a single fund that holds exactly the same shares that make up the MSCI Japan Index, which covers all of the country’s largest listed businesses. Understanding the Sygnia Itrix MSCI Japan ETF The Sygnia Itrix MSCI Japan ETF gives investors broad exposure to the Japanese market. It covers over 300 large- and mid-cap companies listed on the Tokyo Stock Exchange that together make up more than 85% of the total value of the market. Its largest sector exposure is to industrial companies, which include firms that produce everything from machinery to rubber, glass and ceramics, followed by consumer goods, information technology and financials. The fund is highly diversified, with the largest holding, Toyota, being just 4% of the total portfolio. This makes it far less concentrated than South African index funds, which are dominated by a few very large stocks. The advantages of the Sygnia Itrix MSCI Japan ETF The top Japanese companies have been producing quality goods for decades; their brands are well recognised and used across the world. Investors in the Sygnia Itrix MSCI Japan ETF
will therefore gain exposure to stocks with strong revenue streams that earn their profits in many different markets and are thus not dependent on the performance of a single economy. As this ETF is listed on the JSE and can be bought and sold in rand, South African investors get access to this international exposure at a low cost, without having to take money offshore. The MSCI Japan Index is recognised as a barometer of the Japanese economy, so, as the holder of the Sygnia MSCI Japan Index ETF, investors will essentially track the Japanese equity markets.
Performance (annualised):
How does the Sygnia Itrix MSCI Japan ETF fit into a portfolio? The Sygnia Itrix MSCI Japan ETF allows investors to diversify outside of South Africa to reduce their country-specific exposure and to protect themselves against the devaluation of the rand. As it only covers the Japanese stock market, however, it should be used within the broader international component of a diversified portfolio. The fund is fully invested in the stock market, so it can be volatile in the short term and will be affected by currency movements. Investors should thus be prepared to hold this ETF for at least five years.
Keyence Corporation
How to access the Sygnia Itrix MSCI Japan ETF The Sygnia Itrix ETFs are available through Sygnia’s Alchemy investment platform and can be bought in the same way as unit trusts, providing investors with ease of access. Our ETFs can also be invested in through any stockbroker in South Africa if you have an existing stockbroking or personal share portfolio account.
Information technology: 11.1%
Key features of the Sygnia Itrix MSCI Japan ETF • Index tracked: MSCI Japan Index • Total expense ratio: 0.86% • Fund size: R710 million
Other: 7.5%
Assets invested in US ETF and ETP industry break through $4tn milestone ETFGI, a research and consultancy firm covering trends in the global ETF/ETP ecosystem, reports that assets invested in the US ETFs and ETPs industry broke through the $4tn milestone at the end of July. ETFs and ETPs listed in the US gathered net inflows of $33.90bn in July, bringing year-to-date net inflows to $149.76bn. Assets invested in the US ETF/ETP industry have increased by 1.6%, from $3.96tn at the end of June, to a new record of $4.02tn,
according to ETFGI’s July 2019 US ETF and ETP industry landscape insights report. “The S&P 500® gained 1.4% in July, as strong earnings combined with signs of economic growth and expectations of a rate cut by the Federal Reserve supported equity gains,” says Deborah Fuhr, managing partner, founder and owner of ETFGI. “International markets posted losses, with the S&P Developed ExUS and the S&P Emerging BMI both
3 years:
4.4%
5 years:
8.3%
10 years:
10.3%
Top holdings: Toyota Motor Corp. Softbank Corp. Sony Corp. Mitsubishi UFJ Financial Group
Takeda Pharmaceutical Co Ltd Sumitomo Mitsui Financial Group Inc. KDDI Corp Honda Motor Co Ltd Nintendo Co Ltd Sector allocation: Industrials: 21.3% Consumer discretionary: 18.2%
Financials: 10.7% Healthcare: 8.8% Telecommunication services: 5.6% Consumer staples: 8.9% Materials: 5.8%
30 June 2019
GROWTH IN US ETF AND ETP ASSETS AS OF THE END OF JULY 2019
down 1%, with headwinds including US dollar strength. Boris Johnson began his term as UK Prime Minister with demands for a renegotiation of the EU withdrawal agreement, issuing a threat to otherwise leave
without one. Pound sterling fell to near its lowest in two years.” At the end of July 2019, the US ETF/ETP industry had 2 280 ETFs/ ETPs, from 151 providers listed on three exchanges.
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