Global X has unveiled a pair of ETFs in Japan providing exposure to domestically listed equities aligned with two technology-focused investment themes: digital innovation and e-commerce.
Global X has listed two technology-focused ETFs on the Tokyo Stock Exchange.
Listed on the Tokyo Stock Exchange, they are the Global X Digital Innovation Japan ETF (2626 JP) and the Global X E-Commerce Japan ETF (2627 JP).
Akihiko Kanamura, President of Global X Japan, commented: “We believe that the Japanese ETF market will continue to grow in the future on the trends of diversification and low-cost wealth management. We aim to be a thematic ETF pioneer in Japan and provide distinctive ETFs to investors in Japan.”
Digital innovation
The Global X Digital Innovation Japan ETF tracks the Solactive Digital Innovation Japan Index which selects its constituents from a universe of TSE-listed stocks with market capitalizations above ¥30 billion and average daily trading values greater than ¥300 million.
The index incorporates an ESG screen to remove companies with meaningful exposure to tobacco or controversial weapons as well as firms identified as UN Global Compact violators.
Security selection is driven by Solactive’s proprietary ARTIS natural language processing algorithm which screens publicly available information to identify companies that have or are expected to have significant exposure to the digital innovation theme.
Solactive defines the digital innovation space as those companies developing or selling products related to cloud computing, cybersecurity, remote communications, online project and document management, online healthcare and telemedicine, digital and video gaming, video and media streaming, online education, social networks, e-commerce, and e-payments.
The algorithm then ranks the companies it identifies according to the frequency with which the company is referenced in relation to specific keywords, with the 60 top-ranking companies selected for inclusion.
Constituents are weighted by float-adjusted market capitalization subject to a cap of 5% per security. Rebalancing occurs on a semi-annual basis with buffer rules helping to limit unnecessary turnover.
Timo Pfeiffer, Chief Markets Officer at Solactive, said: “Digitalization is all around us, and it continues to change the way we communicate, live, and work. The trend towards a fully digitalized world is inexorable, and immense growth potential lies in companies at the forefront of this trend.”
Jooyoung Yun, CIO at Global X Japan, added: “I am very delighted to launch the first thematic ETF investing in the digital innovation in Japan with Solactive. Global X Japan aims to be a pioneer in Japan’s thematic ETF field and will continuously provide innovative and differentiated products to the market. Global X Japan will be the bellwether of diversity and innovation in Japan’s ETF market.”
E-Commerce
The Global X E-Commerce Japan ETF, meanwhile, is linked to the Indxx Japan E-Commerce Index which begins with an initial universe of TSE-listed securities with market capitalizations above ¥50bn and average daily trading values greater than ¥300m.
Indxx uses FactSet’s Revere Business Industry Classification System (RBICS) to screen for companies deriving significant revenue from certain industries linked to four sub-themes: e-commerce, digital payments, online subscriptions, and online marketplaces. The methodology identifies ‘pure-play’ firms, defined as those deriving more than 50% of their revenue from the relevant industries, as well as ‘quasi-play’ firms which derive between 20% and 50% of their revenue from the industries.
The index first selects all pure-play securities. If fewer than 20 stocks comprise the index, the top quasi-play companies by revenue attribution are included until the count is reached. In the scenario that all quasi-play companies are selected and the count is still below 20, the index may also include logistics REITs linked to the e-commerce theme.
Constituents are weighted by float-adjusted market capitalization subject to a cap of 8% on pure-play issuers, an aggregate cap of 10% on quasi-play companies, and an aggregate cap of 10% on logistics REITs.
Each ETF comes with an expense ratio of 0.59%.
Global X made its ETF debut in Japan in August 2020 with the launch of two income-focused ETFs. The Global X MSCI SuperDividend Japan ETF (2564 JP) provides exposure primarily to Japanese equities with high dividend yields, while the Global X Logistics J-REIT ETF (2565 JP) targets Japanese real estate investment trusts focused on logistics facilities.