13 March 2011

How should investors trade after the Japanese Disaster?

Special edition from Japanese Earthquake on 11/03/2011 (black Friday?).

Duped as Japan's deadliest disaster in more than a century, 10m high tsunami crushing on the coast line, and yet to be confirmed - world's worst nuclear disaster in 25 years. I'm sitting in front of computer screen, reading the news while monitoring the share market that Friday. The more I read, my heart is bumping faster, and the share market is going downhill.

Modified Tsunami picture

In fact, KL is raining for whole day, signaling the bad situations would appeared somewhere, and it materialized in Japan shortly. In the morning session, KL market is rather quite. I asked myself: "Today, traders are still in bed due to the favorable sleeping weather?".

To recap, below is the performances of major market on Friday.
Bloomberg
What should investors do?
And, how should investors trade going forward?


Personally speaking, I don't think this is a good time to accumulate. We never know the bottom. Catching the falling knife is very dangerous, and it's not worth to take the risks. Let's gauge it with the previous major earthquake in Japan, the 1995 Kobe temblor. According to Macquarie Group Ltd, Japanese stocks fell 8% in the week after Kobe temblor.

Meaning, with 1.72% down on last Friday,  there is another 6.28% to go. But, the aftermath is more serious this round, thus, at least 10% slump is justifiable. Japanese yen strengthen considerably on Friday, as investors pull money out from share market and into government bonds or money market.

Sorry to say that the Japanese outlook is very bleak currently. Being the world's most indebted country, and with a negative growth in 4Q2010, Japan needs time to rebuild and time to restore investors' confidence.


Malaysia timber companies to do well?
However, timber companies should do well in the expense of Japan's disaster. Stocks to watch is Ta Ann, WTK and Jaya Tiasa. Japan is the single most important market for local timber companies. As such, the main catalyst for timber sector now is the reconstruction of affected area in Japan in the coming months.

 

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