In extreme situations like earthquakes or oil spills, it can be hard to see the forest through the trees, but I think its worth remembering that Chile, Turkey, Indonesia and Japan all share two things in common (They might have more in common, but these two are relevant today). First, all four countries have been hit by fatal earthquakes in the past 13 months. Second, investors can gain exposure to the quartet through liquid ETFs listed on U.S. exchanges.
Obviously, Japan is a highly developed economy, the third-largest in the world in fact, and the others are emerging markets, but if history is a guide, Japan-specific ETFs may offer astute investors profitable opportunities in the coming months.
Indonesia endured a fatal earthquake in late October and the Market Vectors Indonesia ETF (NYSE: IDX), the most liquid Indonesia-specific ETF, is lower since then, but this is probably more a symptom of emerging markets falling out of favor and Indonesia's battle with inflation than it is the earthquake.
As for the iShares MSCI Chile Investable Market Index Fund (NYSE: ECH), as the chart below indicates, the ETF endured some rough times following the earthquake that ravaged Chile on Feb. 27, 2010 and the ETF definitely wasn't a near-term buy following quake, but by being patient and keeping ECH on their radar screens, savvy investors could have entered a position in ECH in May or June and been sitting on some nice profits by mid-July.
The iShares MSCI Turkey Investable Market Index Fund (NYSE: TUR) is a different story to a certain extent. TUR actually performed well following the March 7, 2010 quake that hit Turkey only to begin sliding five weeks later. Still, TUR was in much better shape in July than it was in the days following the quake.
Am I telling you to run out and buy the iShares MSCI Japan Index Fund (NYSE: EWJ) or any ETF that has been tinged by Japan's recent tribulations right this second? No. Japan's economy has an assortment of well-documented issues that are being put in a negative spotlight thanks to these natural disasters and there might be a bit more downside in Japan ETFs in the coming days.
That said, I'll stick my neck and say that I believe funds like EWJ or the WisdomTree Japan Hedged Equity ETF (NYSE: DXJ) will be trading at levels comparable to, if not above, where they were pre-quake in June or July. For my money, that says to me there is no reason not to build a watch list of four or five ETFs with significant Japan exposure and spend 15 or 20 minutes each week studying their charts looking for proper entry points. I did that on Monday night and I'll update you on the progress of my ETFs in mid-June.
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