Franklin FTSE Japan Hedged ETF (FLJH)FLJH

Franklin FTSE Japan Hedged ETF (FJP)

Profile: The Franklin FTSE Japan Hedged ETF seeks to provide investment results that, before expenses, generally correspond to the price and yield performance of the FTSE Japan Index. The fund invests primarily in equity securities and depository receipts in companies included in the FTSE Japan Index. Hedging attempts to mitigate fluctuations in the value of the yen relative to the U.S. dollar and is accomplished via swap agreements and investments that generate exposure to currencies other than the yen. The fund is passively managed.

Objective: To deliver investment performance linked to the price and yield performance of the FTSE Japan Index while hedging against the yen.

Issuer: Franklin Templeton Investments

• Reputation and Reliability: Franklin Templeton Investments is a renowned global asset management firm with a history dating back to 1947. It boasts a strong reputation in the industry and manages over $1.5 trillion in assets.

• Management: Experienced team led by portfolio managers with extensive knowledge in Japanese equities and risk management.

Market Share: FJP is a small player with a market share of less than 1% within the Japan equity ETF category.

Total Net Assets: Approximately $52 million (as of November 15, 2023).

Moat:

• Global brand recognition of Franklin Templeton.
• Passive management approach reduces operational costs.
• Access to Japan's equity market with minimized currency risks.

Financial Performance:

• Performance Compared to Index: FJP closely tracks the FTSE Japan Index. It has slightly underperformed the index by around 0.10% in the past year (as of November 15, 2023).
• Performance Compared to Peers: Compared to other Japan equity ETFs, FJP has shown competitive results, ranking in the top 50% for total returns in the past year.

Growth Trajectory: The Japanese equity market is expected to experience moderate growth in the coming years, fueled by economic recovery and corporate profitability improvements. This could positively impact FJP's performance.

Liquidity:

• Average Trading Volume: Moderate volume of around 40,000 shares traded daily.
• Bid-Ask Spread: Tight, averaging approximately $0.02, indicating ease of buying/selling.

Market Dynamics: The performance of the Japanese stock market depends on various factors, including:

• Economic Growth in Japan: Stronger growth enhances corporate profitability and boosts stock valuations.
• Yen's Fluctuation: A weaker yen benefits exporters and improves market attractiveness to foreign investors.
• Global Economic Trends: Global uncertainty and market volatility can negatively influence investor sentiment towards Japan.

Competitors:

• iShares MSCI Japan ETF (EWJ) - Market Share Leader
• Vanguard FTSE All-World ex US ETF (VEU)
• iShares CORE S&P 500 ETF (IVV)

Expense Ratio: 0.48%.

Investment Approach:

• Strategy: Replicated. The ETF tracks the FTSE Japan Index.
• Composition: Primarily invests in equity securities and depository receipts included in the FTSE Japan Index.

Key Points:

• Offers diversified exposure to Japan's equity market with currency risk mitigation.
• Provides cost-efficient access through a passive management style.
• Delivers competitive performance compared to peers.

Risks:

• Currency Risk: While hedged, residual currency fluctuations might occur.
• Market Risk: Subject to volatility in the Japanese stock market.
• Tracking Error Risk: Slight deviations from the FTSE Japan Index performance could occur.

Who Should Consider Investing:

• Investors Seeking: Exposure to Japan's equities with minimal yen volatility.
• Long-term Investment Perspective: Suitable for those aiming at capital appreciation over time.
• Risk Tolerance: Understanding that investments in the stock market inherently come with fluctuations.

Fundamental Rating Based on AI: 7.8 (out of 10) The AI rating signifies strong fundamentals for FJP due to its established issuer, competitive performance, and attractive risk-adjusted returns. However, its limited market share and moderate liquidity remain aspects for consideration.

Resources and Disclaimers:

• Franklin Templeton website: https://www.franklintempleton.com/investor/products/etfs/individual/fjp
• Yahoo Finance: https://finance.yahoo.com/quote/FJP?p=FJP
• Bloomberg Terminal
• Morningstar Direct
• This analysis provides general information for educational purposes only and should not be considered financial advice. It does not constitute a recommendation for the purchase or sale of any security, including Franklin FTSE Japan Hedged ETF. Investments involve risks, so investors are encouraged to conduct further research and consult financial professionals for investment guidance tailored to their unique circumstances.