“S&P 500” and “All Country Index” Boom Due to Weak Yen

The weaker the yen, the higher the price…What you need to know about the relationship between “exchange rates” and “index funds

While domestic and foreign stocks have been soft, the price movements of index funds such as “S&P500” and “Orcan,” which are very popular in NISA, have remained strong. The main reason for this is the ongoing depreciation of the yen in the foreign exchange market. In the case of “no currency hedging,” prices rise as the yen weakens. However, when the yen appreciates, the price will fall. So, what is the actual impact of the yen’s appreciation on prices? 　An expert explains how the NAV of an overseas index fund works.

In the wake of the stock market slump The “Nikkei S&P500 and “Orkan” are doing very well.

After peaking in late March, the U.S. stock market turned downward and has been in an adjustment phase. The Nikkei Stock Average, which also peaked at 41,000 yen in late March, has also been in a slump. Texts such as “This is the first trial since the start of the new NISA” have appeared on the Internet news and social networking services, but not many people seem to be feeling the pain.

This is because index funds such as “S&P500” and “Orcan,” which are overwhelmingly popular in the NISA, are moving near their highs (Orcan is the common name for Mitsubishi UFJ Asset Management’s “eMAXIS Slim” series “Global Equity [All Country]”). (Orcan is the common name for Mitsubishi UFJ Asset Management’s eMAXIS Slim “All Country” series.)

The reason for this is the ongoing depreciation of the yen. Most individual investors are not hedged against exchange rate fluctuations, so when they invest, they convert yen into dollars or other foreign currencies. Therefore, the more the yen weakens, the more the prices of foreign currency-denominated assets, such as the S&P 500 and the Orcan, rise.

Rates of appreciation due to the “weaker yen” exceed those of the indexes.

The impact of the yen’s depreciation is larger than one might imagine. The S&P 500, which consists of about 500 U.S. companies listed on the U.S. stock market, rose about 7% from the end of 2011 to the end of April 2012, while the index fund in yen terms rose about 19%. Thisdifference ofabout12percentage points can be attributed to the yen’s depreciation.

How about Orcan? The underlying index, the MSCI All Country World Index (“MSCI ACWI”), on a local currency basis has also risen about 5% from the end of last year to the end of April ’24. In yen terms, it rose about 17%, the same as the S&P 500 by about 12 points. The yen’s depreciation has also boosted the index by 12%, exceeding the growth rate of the underlying index.

The fund is linked to an index calculated by the management company on a yen-equivalent basis.

The impact of exchange rates on index funds that invest in overseas markets, such as the S&P 500 and Orkan, is larger than is generally believed. This can be clearly understood by understanding how the NAV of a fund is determined. Let us explain the NAV of a fund that invests in overseas markets.

The monthly reports and management reports of the “eMAXIS Slim” series show that the NAV is linked to the underlying indexes of the S&P 500 and MSCI ACWI, but not to the underlying indexes of the S&P 500 or MSCI ACWI, which also reflect “dividends,” so the difference between the two is the NAV in “yen terms. The difference is the “yen-equivalent basis. The difference is that the S&P500 and MSCI ACWI are calculated by the asset management companies on a “proprietary” basis. In the case of the “eMAXIS Slim” series, Mitsubishi UFJ Asset Management calculates them.