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  • Trading on Japanese Uncertainty 0 comments
    Mar 22, 2011 12:56 PM | about stocks: EWV, EZJ, EWJ, TM, HMC

    By Daniel James Hayden IV

    Although the Japanese stock market surged higher during trading on Tuesday in Tokyo, Japanese exporters still face many hurdles in getting back to their pre-disaster production levels.

    The Japanese stock market tanked after the deadly earthquake and tsunami that devastated many of of Japan's northeastern coastal communities.

    The disaster has led to the shutdown of many factories, as well as number of nuclear reactors being taken offline and a significant reduction in Japan's oil refining capacity.

    The seemingly reduced likelihood of a nuclear meltdown at the heavily damaged Fukushima Daiichi nuclear power plant, along with positive remarks about the Japanese economy's prospects from billionaire investor and head of Berkshire Hathaway Inc (BRK-A) (BRK-B) Warren Buffett, fueled a surge in Japanese stock prices on Tuesday.

    However, much of the obstacles to a recovery for the Japanese economy remain and not all the news coming out of Japan is good.

    Auto manufacturers Honda Motor Company (NYSE:HMC) and Toyota Motor Corporation (NYSE:TM) have both announced that they are extending factory shutdowns.

    The company's are facing problems bringing production back up to normal levels because of power shortages, infrastructure damage and shortages of the parts needed to manufacture their products.

    The difficulties facing Japanese manufactures are being compounded by the fact that some of their international customers may not be willing to wait for Japanese factories to come back online and may switch to alternative suppliers.

    There are several investment options for investors who either want to invest in a Japanese recovery or feel that the surge in Japanese stock prices will be overshadowed by problems that still need to be addressed.

    The iShares MSCI Japan Index Fund (NYSEARCA:EWJ) and the ProShares Ultra MSCI Japan (NYSEARCA:EZJ) are two ETFs for investors to consider if they feel that the Japanese will soon be able to put these problems behind them and rebuild.

    On the other hand, the ProShares UltraShort MSCI Japan (NYSEARCA:EWV) ETF is an for investors who think that the Japanese economy has too many negatives to overcome and that the recent jump in stock prices will be short lived but don't want to short individual stocks.



    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Stocks: EWV, EZJ, EWJ, TM, HMC
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