JPN: new Japan equity ETF by Deutsche

Deutsche Asset & Wealth Management begun trading the Deutsche X-trackers Japan JPX-Nikkei 400 Equity ETF (NYSEArca: JPN) on Wednesday, June 24, 2015.
Here is a synopsis of the new ETF:


Symbol: JPN Exchange: NYSE Arca
Name: Deutsche X-trackers Japan JPX-Nikkei 400 Equity ETF Net Expense Ratio: 0.40%


The Deutsche X-trackers Japan JPX-Nikkei 400 Equity ETF seeks investment results that correspond generally to the performance, before fees and expenses, of the JPX-Nikkei 400 Net Total Return Index. The Fund will invest at least 80% of its total assets, but typically far more, in instruments that comprise the Underlying Index.

The JPX-Nikkei 400 Net Total Return Index is comprised of the equity securities of the 400 highest scoring issuers listed on the JASDAQ and Tokyo Stock Exchange (TSE), as measured in return on equity (ROE), cumulative operating profit and current market value.
The Underlying Index is designed to reflect the performance of the Japanese stock market, specifically companies which are primarily listed on the TSE 1st section, TSE 2nd section, TSE Mothers or JASDAQ markets. The currency of the component securities is the Japanese yen.
In order to be eligible for inclusion in the Underlying Index, equity securities must meet the following criteria:
(1) Must have been listed on the TSE 1st section (for large companies), the TSE 2nd section (for middle-sized companies), the TSE “Mothers” section (for high-growth and emerging stocks) or the JASDAQ Stock Exchange (“JASDAQ”) for at least 3 years;
(2) Generally, must be common stocks (non-common stocks may be included in the eligible constituents if they are regarded as equivalent to common stocks and their inclusion is deemed particularly necessary by the Index Providers);
(3) Must have more assets than liabilities for the last 3 fiscal years;
(4) Must have no operating or overall deficit in the last 3 fiscal years;
(5) No notes to the going concern assumption in the company’s financial statements, and must not have a statement that there is a significant insufficiency or not possible to release appraisal of internal controls in the company’s internal control report;
(6) Are not designated as a security to be de-listed or a security on alert; and
(7) In the past year, must not have been subject to (a) public announcement measures, (b) request for improvement reports for public inspection, or (c) payment of a penalty for violation of the listing agreement.

The top 1,000 companies that meet the above criteria, ranked by market capitalization, will be selected based on trading volume during the past 3 years and current market capitalization as of the base date for selection (typically the last business day of June). The top 1,000 securities by market capitalization shall be selected in descending order out of the 1,200 securities with the highest trading value in the 3 years since the base date (such 1,200 securities being the “Selection Pool”). In cases where less than 1,000 securities are eligible to be selected per this method, the remaining securities shall be selected by taking the remaining securities in the  Selection Pool that have the highest market capitalization on the base date. The 1,000 securities selected are then scored according to the ranking of the following 3 items (i.e., first will be allocated 1,000 points and last will be allocated one point).
An overall score is then determined by aggregating those ranking scores with the following weights:
(1) Three year return on equity: 40%;
(2) Three year cumulative operating profit: 40%; and
(3) Market capitalization on the selection date: 20%.

The 400 highest scoring securities will then be selected as constituents of the Underlying Index and weighted according to free float (i.e., the amount available for trading) market capitalization. No one Underlying Index component may comprise more than 1.5% of the Underlying Index as of the base date. The Underlying Index is rebalanced annually in August. The Underlying Index is a total return index. A total return index calculates the performance of the index constituents on the basis that any dividends or distributions are reinvested.

As of December 30, 2014, the Underlying Index consisted of 400 securities with an average market capitalization of approximately $237 billion and a minimum market capitalization of approximately $300 million. As of December 30, 2014, the Underlying Index was substantially comprised of issuers in the consumer staples sector.


Index Top Holdings (05/29/15):

Mitsubishi UFJ Financial Group 1.76%
FANUC 1.62%
KDDI 1.59%
Mizuho Financial Group 1.59%
Toyota Motor 1.57%
Nippon Telegraph & Telephone 1.53%
Sumitomo Mitsui Financial Group 1.50%
Canon 1.41%
Japan Tobacco 1.38%
Honda Motor 1.35%


Index Top Sectors (05/29/15):

Industrials 21.6%
Consumer discretionary 19.5%
Financials 18.7%
Information technology 10.0%
Consumer staples 8.3%
Health care 7.8%
Materials 6.8%
Telecommunication services 5.3%
Energy 1.1%
Utilities 0.9%


Useful Links:
JPN Home Page

Category: Equities> Regions> Asia> Developed Asia Equities> Japan

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