Home Daily Blitz The ETF Whale Blamed for Moving Japanese Markets Gets Reeled In

The ETF Whale Blamed for Moving Japanese Markets Gets Reeled In


bloomberg articleThe following is an excerpt from Anna Kitanaka | October 18, 2015 | Bloomberg.com |

In the final moments before Japan’s stock exchange closes each day, one investor has increasingly captured the attention of traders in Tokyo: the world’s biggest leveraged exchange-traded fund.

Run by Nomura Asset Management Co., the Next Funds Nikkei 225 Leveraged Index ETF has more than doubled its assets over the past five months to the equivalent of $6.5 billion. Because it needs to buy near the end of the trading day when shares rise (or sell if they fall), the fund has been accused by some traders of amplifying moves in Asia’s second-largest equity market. More than 70 percent of the time over the past two months, the Nikkei 225 Stock Average has compounded its intraday return in the final 15 minutes.

While Nomura Asset has denied that it’s causing the late-day moves, the money manager took the rare step of halting new subscription orders for the Next Funds ETF last week. Over time, cash will probably flow out of the fund, diminishing the market impact of both the ETF and the speculators who try to front-run its trades, according to CLSA Ltd. strategist Nicholas Smith. Anything that dampens volatility will be good news for long-term investors put off by the biggest Japanese share-price swings in two years, Smith said.

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