Daiwa unveils two low-cost Japanese equity ETFs

Nov 13th, 2020 | By | Category: Equities

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Tokyo-based Daiwa Asset Management has launched two new ETFs providing low-cost exposure to mainstream Japanese equity indices – the Nikkei 225 and the TOPIX.

Daiwa unveils two low-cost Japanese equity ETFs

Daiwa has launched two low-cost ETFs in Japan tracking the Nikkei 225 and TOPIX indices.

The iFreeETF-Nikkei225 (2624 JP) and iFreeETF-TOPIX (2625 JP) have listed on Tokyo Stock Exchange and come with expense ratios of just 0.12% and 0.06%, respectively.

Both ETFs make distributions to investors on a quarterly basis.

Nikkei

The Nikkei 225 is price-weighted and follows the top 225 blue-chip companies with high liquidity listed on TSE. Owing to its construction methodology, the index has often been referred to as the Japanese equivalent of the Dow Jones Industrial Average.

The index includes many well-known names such as Canon, Panasonic, Sony, Nissan, Toyota, Mitsubishi, and Honda. The largest constituent is Fast Retailing with a weight of 11.8%, followed by SoftBank Group at 5.7%.

In terms of sectors, consumer discretionary and industrial stocks play a significant role in the index with weights of 21.5% and 19.1%, respectively, followed by information technology (16.3%), health care (14.6%), and communication services (10.9%).

An annual review of constituents takes place at the start of October each year.

Investors can obtain slightly cheaper exposure to the Nikkei 225 through a BlackRock fund, the iShares Core Nikkei225 ETF (1329 JP). This fund comes with an expense ratio of 0.105% and houses ¥725 billion (approx. $6.9bn) in assets under management.

There are eight other Nikkei 225 ETFs listed on TSE with expense ratios ranging up to 0.225%.

TOPIX

The TOPIX, meanwhile, provides broader equity access and consists of all domestically listed stocks (over 1,800 companies) on the First Section of the TSE. Constituents are weighted by float-adjusted market capitalization.

Electric appliances accounts for the largest sector weight at 16.1%, followed by information & communication (9.8%), chemicals (7.3%), transportation equipment (7.3%), and pharmaceuticals (5.9%).

At the stock level, the index is fairly well-diversified with the largest individual constituents being Toyota and Sony at 3.4% and 2.4% respectively.

Daiwa’s new offering matches the cost of the cheapest existing TOPIX ETF which, similarly, is offered by BlackRock – the ¥500bn ($4.8bn) iShares Core TOPIX ETF (1475 JP). There are seven other ETFs in Japan that also track the TOPIX with expense ratios ranging up to 0.12%.

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