US Investors Adding Gold and Japanese Equities To Their Portfolio to Start 2017 2

Gold miners are in demand

Bloomberg data shows that in the firm’s ‘Global’ category, US investors have shown an inclination towards gold mining ETFs listed on US exchanges. The VanEck Vectors Junior Gold Miners ETF (GDXJ) has seen net inflows of $1.3 billion in YTD 2017 until March 3. In second place is the VanEck Vectors Gold Miners ETF (GDX), which has seen $908 million in inflows in the same period. These two ETFs combined account for a little over two-thirds of the total flows witnessed by the ‘Global’ category in the year so far.

The FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR) is a distant third, with $406 million in inflows.

Among the two gold-mining ETFs, the GDX has seen higher net inflows in the one-year period, amounting to $4.6 billion, with the GDXJ seeing $3.1 billion inflows in the period.

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Comparison between GDX and GDXJ

While the GDX tracks the NYSE Arca Gold Miners Index, the GDXJ is benchmarked to the MVIS Global Junior Gold Miners Index.

The primary difference between the two ETFs is the size of gold mining companies that they invest in. While large-cap companies with market-cap of over $5 billion form 58.4% of the GDX, they form only 4.5% of the GDXJ. Close to 60% of the GDXJ’s assets are invested in mid-cap companies with a market-cap between $1 billion and $5 billion.

Japanese equities are in demand too

An interesting insight into US investors’ preference for equity investing beyond their borders were the inflows into Japan-focused ETFs.

Bloomberg data showed that even though US-listed ETFs investing in Japanese equities have seen outflows of $5.9 billion in the past one year, in YTD 2017 until March 3, they have seen inflows worth $884.3 million. However, it is important to note that these ETFs have been witnessing some outflows in recent weeks.

Japanese stocks had done quite well in 2015 with the Nikkei 225 having risen 9.1%. For reference, the S&P 500 had contracted 0.7% in the year. However, 2016 was a contrast with the Nikkei 225 having barely risen while the S&P 500 was up 9.5%. The Nikkei 225 is up 1.9% in 2017 so far.

The WisdomTree Japan Hedged Equity ETF (DXJ) has seen the largest inflows in YTD 2017, amounting to $450 million, among these ETFs. In the past one year though, outflows from this fund stand at a staggering $3 billion. Meanwhile, the iShares MSCI Japan ETF (EWJ) is second, with inflows of $272.5 million in this year.

Interestingly, though the Deutsche X-trackers MSCI Japan Hedged Equity ETF (DBJP) has not seen significant inflows this year, it has attracted the most funds among US-listed Japan-focused ETFs over the past one and three years, amounting to $768 million and $1.7 billion respectively.

In the next article, let’s focus on emerging markets and see the pattern of investing via ETFs in 2017.

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