Stock market pundits probe tsunami impact

Published by rudy Date posted on March 17, 2011

It’s really too early to tell the impact of the deadly earthquake on the Japanese and the global economy, but stock market pundits agree that the catastrophe will result in a massive reconstruction job that, in the medium-term period, could finally prop up the gross domestic product in the devastated nation.

An analyst-friend from a stockbrokerage house offered his initial market assessment but cautioned that it would be difficult to analyze the extent of the impact on the Japanese economy this early. Japan is still in a search-and-rescue mode and grappling at this very hour to contain the nuclear crisis in Fukushima. Authorities have not come to the point of assessing the damage from the earthquake and tsunami and the overall impact on the economy.

“To be certain, it will be a significant blow. However, it remains to be seen how big it will be and how long the effects will linger,” the broker-analyst said.

In a note sent to selective clients, the broker said base metal demand would likely decline in the short term as zinc, copper and nickel plants in affected areas in Japan had shut down for either inspections or repairs.

“Metal prices will, therefore, be subdued for the meantime. This has implications for Philex Mining Corp. and Atlas Consolidated Mining and Development Corp. but, more importantly, for Nickel Asia Corp.

Nickel Asia shareholder and client Pacific Metals Co. Ltd. of Japan had stopped operations at its Hachinohe plant in Japan due to damages caused by the earthquake and tsunami. Nickel Asia on Tuesday shed P0.90 to P19.60.

Pacific Metals owns 2.8 percent of Nickel Asia and holds a 36- percent stake in Rio Tuba Nickel Mining Corp. and 33.5 percent in Taganito Mining Co. Rio Tuba and Taganito are units of Nickel Asia.

Nickel Asia earlier projected that 12 percent of its ore volumes would be sold to Pacific Metals this year.

“The knee-jerk reaction would be to sell down NIKL some more but we believe it might be a good opportunity to buy. For one, there is no evidence to suggest that Pamco’s plant is damaged beyond repair. In fact, it appears to be only flooded, which is something that can be remedied fairly quickly. Second, the ore meant for Japan can be sold in China instead,” says the broker.

Semirara Coal Corp. may benefit from Japan’s disaster. Japan may now rely more on power from coal and gas-fired plants. Coal prices, which have already surged due to flooding in Australia and the higher cost of crude, could get a further boost due to additional demand from Japan.

Exports watch

Japan is an important trading partner, accounting for about 15 percent of Philippine exports. “Some of these exports may be delayed but the vast majority of deliveries will continue to be made. The country’s export growth may slow down but it could be that the resurgent US economy takes up the slack,” the memo says.

The financial data available from Integrated Microelectronics Inc. do not show it is materially exposed to the Japanese market. There is also no data in Ionics EMS Inc. and Chemrez Technologies Inc. that suggest significant exposure to Japan.

The big quake and tsunami disrupted transportation in Tokyo and key parts of Japan and would impact on travel momentarily. Cebu Pacific and Philippine Airlines fly to Japan but the route is clearly not that significant for either carrier. “A nuclear meltdown at one or more facility could reduce air travel over a wider area, especially China. But the effects should still be quite small,” the broker analyst noted.

International Container Terminal Services Inc., meanwhile, operates a port in Okinawa which was not affected by the tsunami. The Okinawa terminal accounts for a negligible proportion of ICTSI’s volumes.

Remittances from migrant Filipino workers in Japan could decline with the stoppage of operations in some factories. Workers represent a major buyer group for most local developers. But buyers from Japan probably account for just a small percentage of such sales. There are an estimated 300,000 plus workers in Japan, or just 3 percent of the 10 million deployed worldwide, the analyst said.

He does not see any significant impact on the share prices of Ayala Land Inc., Megaworld Corp., Filinvest Land Inc. or Robinsons Land Corp. Most Filipinos in Japan, he says, are also long-term residents and are unlikely to go home to the Philippines despite the current situation. Remittances from Japan, thus, should remain stable. –Ray Enano, Manila Standard Today


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