Today was a tough day for stock markets. The Japan market, which was already down 6.1% on Monday, is currently down 10.55% on Tuesday. The Nikkei 255 index has plunged 1,649 points within the space of two days. Other Asian markets were hit today as well (most are down 2 to 3%), but none as badly as the Japan stock markets. People are very fearful today as the spectre of a nuclear meltdown at the Fukushima nuclear plant weighed strongly on everyone.
But I have observed over the years of investing that invariably, when the fear is palpable, that’s when it’s actually a good time to enter markets. If we were at the top of a cycle, then maybe it wouldn’t. But Asian markets have been slowly declining slightly since February. Japan itself is now down close to 20% within the space of a week. I wish I had more money to add in, but most of it is already invested. But I would still put in some money into Japan equity markets now. Today’s 10% drop was too big a plunge to not tempt me.
I consider it faith that the Japanese people will pick themselves up from this current triple disaster of earthquake, tsunami followed by potential nuclear incident and carry on. They are a very resilient people that transformed Japan into one of the most important economies in the world starting from almost literally nothing in the aftermath of World War 2. When you can pick yourself up after all of your cities have been bombed into ruins and you have had two atomic bombs wipe out 2 cities within a week, then I have confidence they will stand up again and recover from the triple disaster afflicting Japan now.
The unknown element currently causing the panic in markets right now is likely the uncertainty around the nuclear reactor at Fukushima. Especially for the Japanese people, who bear memories of the two atomic bombs, the current potential meltdown of potentially one or more reactors at Fukushima would be felt deeply. Thus, the reaction is likely to be more emotional and extreme. Radiation is something which you can’t see or touch and fear of the unknown can be far greater than fear for something more tangible.
Consider this. They have already evacuated people (more than 180,000) within a 20 km radius around the reactor, and Tokyo itself is close to 200 km away from Fukushima. No radiation fallout is going to affect people in Tokyo (in any significant manner). Nevertheless, people can be irrational when it comes to such things. But I believe the sell off today is overdone, so I added to my Japan equity holdings. So, my 5k addition today is as follows:
DBS Enhanced Income - $1,000
LionGlobal Japan Equity - $2,000
Aberdeen Pacific Equity - $2,000
The $1,000 into DBS Enhanced Income is because my plans to move towards the end of this year doesn’t change no matter what happens in Japan or to stock markets, so I need to continue to set aside money on an ongoing basis. The other 2k each into Japan and Asia is because I feel that the sell off today has made markets cheaper and more attractive.
The selloff may continue in the short term, such things are hard to say. But its also possible that a rebound happens after this. Nevertheless, at current levels already, things are cheap enough for me to add more, and if they do drop further, then I will add in even more. I am confident that investments made now will in hindsight be a good one after one to two years, though at this point in time, they seem to be a scary thing to do.
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