Combo bets (on rising Japanese stocks and falling yen)
fail as markets turn sharply:
“The WisdomTree
Japan Hedged Equity Fund (DXJ), which combines a long position on Japanese
stocks with a short position on the Japanese yen, sounds like a niche product.
But as that trade played out beautifully over the past few years, with Japanese
stocks soaring as the yen tanked, the ETF has become downright mainstream. …
The product plays
into a popular macro thesis: Expansive policies from the Bank of Japan should
help Japanese stocks and hurt the yen. This trend indeed played out powerfully
for a time, leading the DXJ to nearly double from November 2012 to June 2015.
But the good times
didn't last. In the eight months after hitting that June peak, the ETF lost
nearly all of its gain, falling back to its lowest level in more than three
years. This as both legs of the trade failed, with Japanese stocks sliding and
the yen strengthening amid a global sell-off in risk assets.”Related:
Yen Carry Trade - RIP?