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ETF Daily: Has Japan Come Too Far Too Fast? (EWJ, JOF, DXJ, EWV, JEQ)

Administrator — Wed, 23 Mar 2011 18:32:14 +0000

Our “Daily ETF Watch” begs a question… Have the record inflows of investing capital that have recently into Japan been too much too fast for too volatile of a situation? TrimTabs Investment Research and others have argued that ETF inflows into Japan were seeing record gains after the earthquake and tsunami caused a nuclear scare hat rattled global equity markets for a week. TrimTabs this morning updated the figures to show that Japan equity exchange-traded funds saw inflows of about $1.2 billion, which is close to 18% of assets, in the week after the March 11 Japan disaster. This was the heaviest inflow on record after local shares saw a 16% drop in two sessions.

We looked at Thursday March 10 for the pre-earthquake close on each ETF, looked at the lowest level and the lowest close, and then where shares are back today on each ETF.

iShares MSCI Japan Index (NYSE: EWJ) was at $10.99 before the quake, hit a low of $9.24 with a low close of $9.66, and shares are back up to $10.52 today.

The Japan Smaller Capitalization Fund Inc. (NYSE: JOF) was at $9.21 before the quake, hit a low of $7.68 with a low close of $8.19, and its shares are back up to $9.10 today.

The WisdomTree Japan Hedged Equity (NYSE: DXJ) was at $39.32 before the quake, hit a low of $32.50 with a low close of $33.50, and shares are back up to $36.75.

Meanwhile, there is the inverse-ETF via the ProShares UltraShort MSCI Japan (NYSE: EWV). Its shares rallied while the market tanked and it has slid way back down. This inverse-ETF was at $32.98 before the quake, hit a high of $45.34 with a high close of $42.36, and is back down to $34.86 today.

The Japan Equity Fund Inc. (NYSE: JEQ) is a closed-end fund and it was at $6.38 before the quake, hit a low of $5.35 with a low close of $5.58, and its shares are back to $6.20 today.

It turned out that buyers came in almost immediately as bargain hunters saw that the benchmark Topix index plunged to just under 1-times book value. That was only the second time that has been seen in the past two decades.

Inflows for Japan equity ETFs were about $700 million on March 16 alone and more than doubled the prior record volume day from 2003. TrimTabs noted, “These funds are on track to take in more than $1.5 billion in March, which would break the previous monthly record of $1.1 billion in November 2005.”

What helped to stabilize the markets was BOJ intervention with nearly $500 billion in market liquidity and it doubled its asset purchase program to $124 billion at the same time that the G-7 intervened against the yen’s appreciation in forex markets.

What is interesting is that TrimTabs tabulated some historical data based on inflows and market performance: when iShares MSCI Japan (NYSE: EWJ) sees monthly inflows of $100 million or more, the benchmark Topix is higher three months later about 66% of the time.

When you see it quantified with book values being so low, it helps in understanding why the snap back rally has been so strong. Barron’s even did a cover story called “BUY JAPAN NOW” last weekend. Add in the notion that all of the financial media and mainstream media allowed the nuclear coverage to morph into nearly being tabloid coverage and you end up with a scenario where the whips become career-makers and career-killers.

JON C. OGG

Filed under: ETF, International Markets Tagged: DXJ, EWJ, EWV, JEQ, JOF

Special Japan Coverage: The Financial Fallout–Nikkei Ends Up 5.7%%, DJIA Off 1.2% For The Day

Administrator — Mon, 14 Mar 2011 12:41:48 +0000

3.20 AM The Nikkei ended up 5.7% higher as problems with leaking reactors appeared to be temporarily under control.

8.50 PM The Nikkei recovered some of its lost ground in early trading as fears about a reactor explosion receded. The DJIA recovered most of its early losses and ended near the day’s high.

11 AM The DJIA has sold down by 1.7%. Toyota is off nearly 4%. Sony is off 2.7%. GE off 3.3%

7.05 US DJIA futures indicate an open down 300 points after an 11% drop in Tokyo. GE (NYSE: GE), a key supplier of reactor infrastructure is down 9% in the premarket

3.15: The Japanese Nikkei fell 11% on top of 6.2% yesterday Tokyo Electric Power, owner of the troubled reactors dropped over 24%

Japan has gone from what was bad to far worse over the weekend after Friday’s 8.9-magnitude quake that rocked Sendai and northeast Japan. When we tallied up the damage on Friday and compared the damage to the 1995 Great Hanshin earthquake, or Kobe earthquake, we figured that the small drops being seen in the Japanese markets were not near enough. It turns out that the drop was not just not enough. It was a gross miss entirely as the Nikkei 225 fell a whopping 6.18% to 9,620.49 in Monday trading.

10:50 AM EST UPDATE: EWJ down -7.8% at $9.97; JEQ down -5.8% at $5.90; JOF down by -6.8% at $8.47; and DXJ down -7.7% at $35.31. In pre-market the iShares MSCI Japan Index (NYSE: EWJ) is down 7.9% at $9.95. The Japan Equity Fund Inc. (NYSE: JEQ) has yet to trade but is indicated lower by about 5% on first look; the Japan Smaller Capitalization Fund Inc. (NYSE: JOF) is down 6.4% at $8.51. The WisdomTree Japan Hedged Equity (NYSE: DXJ) is down 3.25% at $37.00. The fallout in individual ADR issues is enormous (priced updated as of 10:50 AM EST:

Sony Corporation (NYSE: SNE) is down 7.4% at $30.98, was down 8.3% at $30.65 in pre-market.

Toyota Motor Corp. (NYSE: TM) is down4.65% at $81.65, was down 6.5% at $80.10 in pre-market.

Honda Motor Co., Ltd. (NYSE: HMC) is down 4.3% at $38.02, was down 5.9% at $39.74 in pre-market.

Hitachi Ltd. (NYSE: HIT) is down 14.3% at $50.68, was down 12.9% at $51.48 in pre-market.

Kyocera (NYSE: KYO) is down 5.15% at $93.12, was down 8.2% at $90.13 in pre-market.

NTT DOCOMO, Inc. (NYSE: DCM) is down 4% at $17.55, same as pre-market coverage.

Internet Initiative Japan Inc. (NASDAQ: IIJI) is down 14.55% at $6.25, was down 10.8% at $6.52 in pre-market.

Canon Inc. (NYSE: CAJ) is down 4.6% at $43.39, was down 6.3% at $45.52 in pre-market.

Nuclear Power ambitions being killed globally
Solar wins as nuclear dies
An earthquake in San Francisco could cost us $390 billion

It is more than difficult to focus solely on the economic impact of tragedy when the death toll is rising and when there is a risk of a total meltdown of a nuclear reactor. The consensus has now come around that this damage will definitely hit Japan’s GDP in the quarters ahead.

JON C. OGG

Update:

Preliminary estimates for the cost of the 8.9 magnitude earthquake are as high as $35 billion, and the effects of the tsunami could cause that to grow

According to research firm AIR Worldwide:

Given the enormity of the Mw9.1 earthquake that struck Japan less than two days ago, it is still in the very early aftermath of the event. Search and rescue efforts are still underway and damage assessment has only just begun, while considerable uncertainty still remains in the parameters that define the event.

Based on currently available information, AIR estimates that insured property losses from Friday’s earthquake will range between 1.2 trillion JPY to 2.8 trillion JPY. Using today’s exchange rate of 81.85 JPY to the dollar, this translates to a range of between 14.5 billion USD and 34.6 billion USD. To obtain this preliminary range, AIR simulated dozens of scenarios with varying magnitude (8.9 to 9.1), focal depth (15 km to 30 km) and rupture width (100 km to 150 km). The losses are most sensitive to rupture dimensions, and become extremely large if the modeled rupture is extended southward towards the Tokyo and Chiba prefectures, which contain a higher concentration of insured properties.

Oddly enough, public safety experts have begun to argue about whether that the Japanese seawalls have been built high enough over the last several years or whether the building code was stringent enough. Japan has spent tens of billions of dollars on seawalls to block tsunami waves since the Kobe quake.

Countries can hardly base public spending on 100 year events, and certainly not on 1,000 year ones. That may be tragic for victims, but earthquake public policy in a nation like Japan could cause a financial crisis comparable in its own way to the earthquake.

Douglas A. McIntyre

Filed under: ADR, Economy, International Markets, Nuclear Tagged: CAJ, DCM, DXJ, EWJ, HIT, HMC, IIJI, JEQ, JOF, KYO, SNE, TM

The Awful Financial Impact From Japan’s 8.9-Quake (EWJ, JEQ, JOF, DXJ, SNE, TM, HMC, BRK-B, SNDK, MU)

Administrator — Fri, 11 Mar 2011 13:46:48 +0000

It is hard to focus solely on the economic impact of tragedy and catastrophe when you read headlines such as “death count 60…” and “death count exceeding 100…” Unfortunately, the damage and the death toll from this fresh 8.9 magnitude earthquake is likely to go much higher as after-shocks are seen. The damage will also have an awful impact on Japan’s economy at a time where the global recovery is deemed as still be a very sensitive recovery. Today’s event will have a negative economic impact against GDP as we have seen in the recent past.

The 1995 Great Hanshin earthquake, or Kobe earthquake, measured only 6.8 magnitude and the epicenter was 20 kilometers from Kobe (about 1.5 million people) that still cost more than 6,400 lives. This caused roughly ten trillion yen in damage, which was about 2.5% of Japan’s GDP at the time.

Today’s earthquake was off of Sendai, Japan with a population of roughly 1 million. The Fukushima nuclear facility is southwest of Sendai and this is the reported nuclear plant where the water level of the reactors is falling.

The Nikkei 225 had already been soft all day in Japanese trading and the quake came late in the trading day and only exaggerated the decline. The Nikkei closed down 179.95 or by -1.72% at at 10,254.43 on Friday. At 8:20 AM EST the iShares MSCI Japan Index (NYSE: EWJ) was down 1.5% at $10.82 on fairly active trading. The Japan Equity Fund Inc. (NYSE: JEQ) has not yet traded and volume is only about 55,000 on average, but shares closed at $6.38 on Thursday and the 52-week range is $4.82 to $6.67. The Japan Smaller Capitalization Fund Inc. (NYSE: JOF) is indicated down 0.7% at $9.15 on thin volume and its 52-week range is $7.55 to $9.85. We have also not yet seen trading in the WisdomTree Japan Hedged Equity (NYSE: DXJ).

Sony Corporation (NYSE: SNE) is down 3.3% at $33.12 and it reported that there was no major damage at the Sony-Ericsson plant suppliers earlier this morning. Toyota Motor Corp. (NYSE: TM) reported that 2 assembly plants in Northern Japan were shut down and its ADRs are down almost 3% at $87.52. Honda Motor Co., Ltd. (NYSE: HMC) reportedly has shut down plants after one death and multiple injuries affected it and its ADRs are down 4.2% at $39.02 this morning.

The big hit will most likely be the reinsurance players, whose shares in European trading are dragging down markets further… Hannover Re was down 4.6% in Germany, Swiss Re was down 4.3%, and MunichRe was down over 4% as well. Berkshire Hathaway Inc. (NYSE: BRK-B) also has reinsurance activities but we have not yet assessed its exposure (if any) in Japan and its shares are indicated lower by 1.5% at $83.69 for its B-shares in pre-market trading.

SanDisk Corporation (NASDAQ: SNDK) has substantial factory activity for its Flash Partners and Flash Alliance ventures in Yokkaichi, Japan… The good news for this is that this is much farther south and west and is even on the other side of Tokyo from Sendai and well over 200 miles away as the crow flies. SanDisk shares are down almost 2% at $44.04 but that may be more tied to the market than due to operations.

One potential winner as the world of semiconductors does have plants in northern Japan could be Micron Technology Inc. (NASDAQ: MU) due to U.S. operations and its shares are actually up 0.15% at $9.94 on a morning where stocks are indicated to be soft.

Keep in mind that these are only a handful of the go-to more liquid issues that have traded here or actively overseas. There are many others and the damage unfortunately involves loss of lives and personal property as well.

JON C. OGG

Filed under: ADR, Economy, Infrastructure, International Markets, Trading Alert Tagged: BRK-B, DXJ, EWJ, HMC, JEQ, JOF, MU, SNDK, SNE, TM

52-Week Low Club (December 28, 2007)

247wallst — Fri, 28 Dec 2007 15:01:00 +0000

Some of these stocks hit 52-week lows and recovered off of lows so they won’t have a low close. But these did all touch or breach the 52-week lows. At the end we also broke out retail stocks, financial stocks, airlines & transports, and hotels. A separate report could have been compiled for REIT’s as well, but many of those were left off because of room or volume. There were enough 52-week lows today that you might even wonder if there had been a mini-crash in the markets. Here are the 52-week lows for December 28, 2007:

Advanced Micro Devices (NYSE: AMD)… imagine if the company got Hector Ruiz to leave.
American Greetings (NYSE: AM)…again.
AstraZeneca (NYSE:AZN)… new entrant.
Carmike Cinemas (NASDAQ:CKEC)
ChipMOS (NASDAQ:IMOS)
Corp. Office Property (NYSE: OFC)
Cryptologic (NASDAQ: CRYP)
Diebold (NYSE:DBD)
Fortune Brands (NYSE:FO)
Group 1 Auto (NYSE: GPI)
Infinera Corp. (NASDAQ: INFN)
Introgen (NASDAQ:INGN)
Japan Smaller Cap Fund (NYSE: JOF)
Lamar Advertising (NASDAQ: LAMR)
Legget & Platt (NYSE: LEG)
Martha Stewart (NYSE: MSO)
Marvell Tech (NASDAQ:MRVL)
Mattel (NYSE:MAT)
McClatchy (NYSE:MNI)
Micron Tech (NYSE:MU)
NGAS Resources (NASDAQ:NGAS)
Nortel Networks (NYSE:NT)
Owens Corning (NYSE:OC)
Omnicare (NYSE:OCR)
Prestige Brand (NYSE: PBH)
PC-Tel (NASDAQ:PCTI)
Ruth’s Chris (NASDAQ:RUTH)
SanDisk (NASDAQ: SNDK)
Theravance (NASDAQ:THRX)
Tractor Supply (NASDAQ:TSCO)
Wendy’s (NYSE: WEN)
World Fuel Services (NYSE:INT)
U-Store-It (NYSE:YSI)

Retail Stocks on 52-week lows: Ann Taylor (NYSE:ANN), Big Lots (NYSE:BIG), Borders Group (NYSE:BGP), Bon Ton Stores (NASDAQ:BONT), Chico’s FAS (NYSE:CHS), Finish Line (NASDAQ:FINL), Liz Claiborne (NYSE: LIZ), Macy’s (NYSE: M), Office Max (NYSE:OMX), Petsmart (NASDAQ:PETM), Stage Stores (NYSE:SSI)

Financial stocks on 52-week lows: Bear Stearns (NYSE: BSC), Citigroup (NYSE:C), Canseco (NYSE: CNO), Discover Financial (NYSE: DFS), Fifth Third Bancorp (NASDAQ:FITB), Fortress Investment (NYSE: FIG), MBIA Inc. (NYSE: MBI), Washington Mutual (NYSE:WM)… urgh! When does it stop?

Airlines/Transports on 52-week lows: Airtran Holdings (NYSE: AAI)…again. Did they launch a Friends Die Free rewards plan? Continental Airlines (NYSE:CAL), Fedex (NYSE:FDX), Mesa Air (NASDAQ:MESA), Northwest Airlines (NYSE: NWA)… near $100 oil is a real pain.

Hotels Hitting 52-week lows: Host Hotels (NYSE: HST), Lasalle Hotel (NYSE: LHO), Starwood Hotels (NYSE:HOT), Sunstone Hotel (NYSE: SHO), Wydham Worldwide (NYSE:WYN). Maybe these all wish they could get the private equity buyers back in the sector. If only they could still borrow.

These CEO’s new year’s resolutions are all the same: "In 2008 I want to keep my stock off the 52-week low lists."

Jon C. Ogg
December 28, 2007

The 52-Week Low Club (May 18, 2007)

247wallst — Fri, 18 May 2007 15:34:25 +0000

Despite day after day of the "New DJIA High" headlines some companies keep going the opposite direction and put in new 52-week lows. This little piggy went to market…..

Atherogenics (AGIX)…. Keeps drifting lower. $140 million implied cash on the books, but negative liquidity with the debt. Maybe it’s easier to be in the parachute business.

CalAmp (CAMP).. Customer issues hurting earnings results, and shareholders.

Gaming Partners (GPIC)… Not all casino suppliers are doing well, even if the company customers are.

Healthcare Realty (HR)… This is and was surprising. Now you have to wonder if that 8% divdend is going to be real.

JDS Uniphase (JDSU)… Dark fiber, is it 2000 all over again?

JAPAN SMALLER CAP FUND (JOF)… this was surprising, even though we usually leave funds off the list.

Shoe Pavilion (SHOE)… must have Digger selling the shoes or it must be smelly feet.

Sonic Solutions (SNIC).. lower revenues, a Roth downgrade, and breaking the sound barrier the way the test pilots did before Chuck Yeager made it.

Jon C. Ogg
May 18, 2007

Jon Ogg can be reached at jonogg@247wallst.com; he does not own securities in the companies he covers.