- Global X Japan Global Leaders ETF (the “Fund”) seeks to provide investment results that, before deduction of fees and expenses, closely correspond to the performance of the FactSet Japan Global Leaders Index (the “Index”).
- The Index is a new index. The Index has minimal operating history by which investors can evaluate its previous performance. There can be no assurance as to the performance of the Index. The Fund may be riskier than other exchange traded funds tracking more established indices with longer operating history.
- The Index is reconstituted annually. Eligible securities are added into the Index as constituents during the next scheduled annual reconstitution. Similarly, securities that no longer meet the eligibility criteria of the Index may continue to remain in the Index until the next scheduled annual reconstitution, at which point they may be removed. There is no guarantee that the representativeness of the Index is optimised from time to time.
- The Fund’s investments are concentrated in securities in Japan. The Fund’s value may be more volatile than that of a fund with a more diverse portfolio. The value of the Fund may be more susceptible to adverse economic, political, policy, foreign exchange, liquidity, tax, legal or regulatory event affecting the Japanese market.
- The Japanese economy is heavily dependent on international trade and may be adversely affected by protectionist measures, competition from emerging economies, political tensions with its trading partners and their economic conditions, natural disasters and commodity prices. Further, the TSE or JASDAQ has the right to suspend trading in any security traded thereon. The Japanese government or the regulators in Japan may also implement policies that may affect the Japanese financial markets.
- The base currency of the Fund is JPY but the trading currency of the Fund is in HKD. The Net Asset Value of the Fund and its performance may be affected unfavourably by fluctuations in the exchange rates between these currencies and the base currency and by changes in exchange rate controls.
- The Index Calculation Agent calculates and maintains the Index. If the Index Calculation Agent ceases to act as index calculation agent in respect of the Index, the Index Provider may not be able to immediately find a successor index calculation agent with the requisite expertise or resources and any new appointment may not be on equivalent terms or of similar quality. There is a risk that the operations of the Index may be disrupted which may adversely affect the operations and performance of the Fund.
- As part of the securities lending transactions, there is a risk of shortfall of collateral value due to inaccurate pricing of the securities lent or change of value of securities lent. This may cause significant losses to the Fund. The borrower may fail to return the securities in a timely manner or at all. The Fund may suffer from a loss or delay when recovering the securities lent out. This may restrict the Fund’s ability in meeting delivery or payment obligations from redemption requests.
- The trading price of the Units on the Stock Exchange of Hong Kong is driven by market factors such as the demand and supply of the Units. Therefore, the Units may trade at a substantial premium or discount to the Fund’s Net Asset Value.
- Payments of distributions out of capital or effectively out of capital amounts to a return or withdrawal of part of an investor’s original investment or from any capital gains attributable to that original investment. Any such distributions may result in an immediate reduction in the Net Asset Value per Unit of the Fund and will reduce the capital available for future investment.
Global X Japan Global Leaders ETF
Re-emerging from the Lost Decades:
Japan’s Resurgence Begins Anew
Japan’s Resurgence Begins Anew
The "Lost Decades" is a term commonly used to describe the period between 1991 and 2001, when Japan faced a prolonged economic slowdown. However, as we enter 2023, the deflationary outlook for Japan has transformed. Japan now finds itself in a new phase of its economy, with a much stronger position for robust growth, thanks to ultra-loose monetary policies.
The surprising performance of Japan's stock market in 2023 has caught the attention of investors, including Warren Buffet, who has expressed his investments in major Japanese trading companies. With a favorable economic cycle driving growth, Japan's export leaders are poised for high expansion.
By investing in the Global X Japan Global Leaders ETF (3150), investors can access 20 Japanese global leaders across multiple industries to capture the resurgence of Japan.
Join Victor Cheung, Head of Investment Solutions at Global X ETFs Hong Kong, as he explains the Japan global leader strategy and how this ETF can provide investors with unique investment opportunities in the Japanese market.
Relatively weak JPY Driving Japan’s Export Growth
With the relatively weak Japanese Yen, leading Japanese export companies are becoming increasingly competitive and are anticipated to be crucial growth drivers in the future.
Particularly Japan is home to the world's largest high-end manufacturers, producing a wide range of consumer electronics, computers, consumer vehicles, semiconductors, and medical devices. Even if the Japanese Yen were to strengthen in the future, Japan's exports would remain difficult to replace.
Warren Buffet’s Favourable Views on Japanese Stocks
Berkshire Hathaway, the US investment company led by Warren Buffet, started investing in Japan stocks in 2020 and topped up regularly since then. Japan became the second largest market in Warren Buffet’s portfolio aside from US1. The stocks he invested are primarily Japanese trading companies, including Mitsubishi Corp., Mitsui & Co., Itochu, Marubeni and Sumitomo Corp.2
Warren Buffet is well known as a value investor. These trading companies are trading at a meaningful discount relative to industry average. At the same time, the companies demonstrated strong cashflow generation capabilities relative to their peers.3
Trading companies are serving as private equity funds in Japan. They make good use of their wide-reaching network to seek out new investment opportunities and diversify their business into several industries, from mining, food & beverage, retail to agriculture. By investing in these Japanese trading companies, investors have exposures from Japanese materials, consumer staples to energy sector.
The Ultra-Loose Monetary Policy of Japan Boosts Stock Investment Opportunities
Japan has implemented an ultra-loose monetary policy for years to stimulate economic growth. With the Bank of Japan's yield curve control policy in place, the yield on Japan's 10-year government bonds remains below 1%, while the U.S. 10-year Treasury is trading around 5%.4 This low government yield, often considered as the earning discount rate, provides a significant advantage to the Japanese equity market, particularly for growth companies.
As evidence of this favorable environment, Japan has witnessed exceptional inflation-adjusted earnings growth over the past decade. The compound annual growth rate (CAGR) of the Nikkei 225 reached 6.4%, surpassing the performance of the S&P 500, CSI 300, and Stoxx 600.5 This demonstrates that Japan's real earnings growth outperforms other markets. Moreover, with the weakening of the Yen, Japan's export sector is expected to become even more competitive.
Japan's ultra-loose monetary policy brings out the emergence of inflation. With nearly full labor participation and a declining working population, strong wage growth has propelled Japan towards reflation after the challenging "lost decades". A study conducted by Rengo, the Japanese Trade Union Confederation, on July 3, 2023, revealed a record-high wage increase rate of 3.58%, surpassing the 3.90% increase observed in 1993.6
Traditionally, Japanese households developed a tendency to hold cash or deposits during the era of deflation. However, as Japan enters a new phase of inflationary periods, this behavior is expected to shift. To preserve their purchasing power, Japanese individuals now recognize the need to invest in equities. This shift in investor behavior will serve as a driving force behind the growth of Japan's equity market.
The Tokyo Stock Exchange’s Initiative on Corporate Governance Reform
In early 2023, the Tokyo Stock Exchange (TSE) took a significant step towards corporate governance reform by releasing guidelines for listed companies. These guidelines urge companies to undertake three key actions: 1) identify the company's cost of capital and enhance capital efficiency, 2) evaluate stock price and market capitalization, and 3) disclose policies and specific initiatives for improvement, particularly for companies with a price-to-book (PB) ratio below 1.
The TSE's initiative aims to boost the growth potential of companies and attract investments to revitalize Japan's stock market. Responding to the TSE's call, an increasing number of companies are implementing share buybacks and increasing dividends. In fact, according to an analysis by Nikkei, Japanese company dividends reached a record high in 2023.7
Looking beyond short-term solutions, it is expected that listed companies will also take measures to generate capital returns and achieve sustainable growth. This long-term focus on capital returns and sustainable growth will serve as a continuously beneficial factor for investors.
Why Invest in Global X Japan Global Leaders ETF (3150)
Targeting Export Leaders in Four Major Sectors
- Toyota is the largest global automaker in Japan, with approximately 10 million vehicles sold worldwide in 2022.8
- They have set a goal to achieve 3.5 million electric vehicle (EV) sales by 2030.9
- Mitsubishi Corp
- Mitsui & Co Ltd
- Marubeni Corp
- Sumitomo Corp
- Nintendo, headquartered in Japan, is a prominent global company specializing in console devices and game development.
- The expansion of the Nintendo Switch Online subscription plan lineup and the sales of paid downloadable content are expected to contribute to earnings, providing new revenue streams.
- Sony Group, a Japanese conglomerate, is a renowned manufacturer of consumer electronics products such as TVs, audio-related electronics, cameras, and game consoles.
- In addition to its electronics division, Sony is involved in various businesses including films, music, and games, creating a diverse portfolio.
- Sony's expanding content ecosystem, which extends beyond physical console software to digital software and digital add-ons, is expected to drive continuous margin improvement.
Index Methodology - FactSet Japan Global Leaders Index
Why ETF?
3150
Global X Japan Global Leaders ETF
| Stock Code | 3150 (HKD) # |
| Underlying Index | FactSet Japan Global Leaders Index * |
Ongoing Charges Over A Year^ | 0.68% |
| Inception Date | 24 Nov 2023 |
# Investment involves risk. Before making any investment decision to invest in the Fund, investors should read the Fund’s Prospectus for details and the risk factors. Visit Global X ETFs Hong Kong website for more details relating to this Fund (including but not limited to the Fund’s iNAV, market price, performance, daily holdings and tracking difference / error).
* The underlying index is a net total return, free-float market capitalization-weighted index that provides the net total return on investments. The net total return index is an index whose performance reflects the reinvestment of dividends or annual interest payments, net of any withholding taxes (including any special charges).
^ The Fund adopts a single management fee structure, whereby a single flat fee will be paid out of the assets of the Fund to cover all of the costs, fees and expenses of the Fund. Click [?] to learn more.
