Traders Are Flocking To This Leveraged International ETF

Last year, the MSCI Japan Index rose 24.3 percent, outpacing the S&P 500 by 260 basis points. Japanese stocks are off to another fine start in 2018 with the MSCI Japan Index trading higher by 7.6 percent.

Bullishness for Japanese equities is prompting some traders to consider juicing their returns with leveraged exchange traded funds, such as the Direxion Daily MSCI Japan Bull 3X Shares JPNL. The Direxion Daily MSCI Japan Bull 3X Shares attempts to deliver triple the daily returns of the MSCI Japan Index.

With Japanese economic data increasingly strong, JPNL is an international leveraged ETF for aggressive traders to consider as 2018 moves forward. Although Japan is one of the lower beta ex-US developed markets, traders should be advised that JPNL is best employed as a short-term trade, not a buy-and-hold investment.

Bullish Data

Data suggest Japan's economy, the world's third-largest, is strengthening.

“The Nikkei Japan Manufacturing PMI rose to 54.4 in January, according to the preliminary ‘flash’ reading, up from 54.0 in December and marking the fastest rate of improvement since February 2014,” said Markit. “The headline reading is a composite indicator designed to provide a single-figure snapshot of manufacturing performance.”

JPNL's underlying index allocates almost 42 percent of its combined weight to consumer discretionary and industrial stocks. Financial services and technology names combine for 25.5 percent of the index's weight. Japanese economic output is also thriving.

“Output growth accelerated to a near four-year high, accompanied by marked increases in both new orders and new export orders, reflecting solid domestic and foreign demand,” said Markit. “Although down slightly on December, order book and export growth rates remained among the highest recorded by the survey since 2013-14.”

Traders Are Excited

With Japan's economy improving and valuations on Japanese stocks compelling, more traders are acknowledging the leveraged JPNL.

Since the start of 2018, JPNL is up 24.3 percent, making it one of Direxion's best-performing leveraged bullish ETFs since the start of the year. Over the past month, JPNL's daily inflows are averaging over $615,000, according to issuer data.