First and foremost, we at Taipan offer our thoughts and prayers to
everyone who has been affected by the recent events that have struck
Japan. As a trader or investor, as awkward and sometimes morbid as it may be, you must think about how your investment portfolio will be affected by a natural disaster such as this.
Given the enormity, severity and far-reaching ramifications of an
event like we have seen, finding an investment angle can be a daunting
It helps to make a list of possible sectors, stocks and currencies
that may be vulnerable, along with a basic thesis for each before you
think about investing any cash or adjusting positions in your
portfolio. Furthermore, you should understand how each investment is
linked to the Japanese economy and/or the aftereffects of the disaster.
A good friend and fellow trader, Jeff Tomasulo, was kind enough to send me a list he compiled of the companies, ETFs
and currency funds that may be correlated directly or indirectly to the
disaster. He also gave me permission to share this list with you. I've
narrowed it down to key companies and investments (because with a
tragedy as big as what's unfolding in Japan can affect huge numbers of
investments) and offered commentary to help rationalize each sector for
The following ETFs are traded here in the States and allow you
to take bullish or bearish positions in a basket of stocks or currency.
The Japanese stock market has been weak, but the yen has been rallying.
Investments in either of these ETFs require further research. There are
many forces pulling on both the currency and profitability of Japanese
companies. Speculating on these types of occurrences requires great
skill; use caution.
- iShares MSCI Japan Index (NYSE:EWJ) — This is a very wide stock
index that encompasses 85% of total equities in Japan. It gives you
broad exposure to the Japanese stock market, which still looks weak.
- CurrencyShares Japanese Yen Trust (NYSE:FXY) — This is an ETF that
essentially tracks performance of the USD/Japanese yen pair, multiplied
by 100. It trades similar to stock. If the yen is increasing in
strength against the dollar, the index is rising and vice versa. It is
an alternative to trading the FX markets.
One thing to keep in mind is that Japan's economy is heavily reliant
on exports. A stronger currency makes Japan's exports more expensive
for other countries to buy. The severe damage to Japan's infrastructure
will also impede production and exports.
Below is a list of Japanese companies that trade on U.S.
exchanges. Basically these stocks trade in tandem with their stocks
listed overseas. An ADR (American depositary receipt) trades just like
a regular stock. They are an easy way for the average investor to buy
or short a foreign company.
Some of these companies may or may not be severely affected;
remember that many of them sell products around the world. Problems may
arise if their factories are damaged or if they have trouble shipping
- Advantest Corp. (NYSE:ATE) — chipmaker
- Nintendo Co. (Pink Sheet:NTDOY) — game consol maker
- Sony Corp.