The five ETFs listed on mainland exchanges – four tracking the Nikkei 225 and one mimicking the Topix index – have dropped about 5 per cent over the past two weeks, underscoring how worsening ties could weigh heavily on Japan’s economy, which is already grappling with accelerating inflation amid public complaints about rising living costs.
The tumult hit ETF holders who sought exposure to Japan’s US$7.3 trillion stock market, which is among the best performers in Asia this year.
“Japan’s service-sector activity will soften over the coming months as inbound Chinese flows decline, pressuring retail, hospitality, airlines and tourism-linked real estate,” said Stephen Innes, a managing partner at SPI Asset Management. “Exporters relying on Chinese intermediate goods now face an elevated headline-risk environment, and analysts will begin to stress-test the resilience of cross-border supply chains.”