Japan, in danger and opportunity
By George Chen
The opinions expressed are the author’s own.
You might consider yourself very smart, powerful or perhaps wealthy, but after watching live coverage on TV of the devastating earthquake and tsunami in Japan on Friday afternoon, what was your reaction? We’re all nobodies in the face of the forces of nature.
On Friday afternoon before the earthquake, the benchmark Shanghai Composite Index showed unexpected signs of recovery but the rebound was unfortunately short-lived. Immediately following the news alert about Japan’s worst earthquake in decades, stock markets from Hong Kong to Shanghai all retreated quickly.
This was a very natural reaction to such a massive natural disaster. Almost the same reaction was seen after the earthquake in China’s Sichuan province in May 2008. When investors feel uncertain and then the market sentiment becomes anxious, they sell. Fair enough – who really is in the mood to trade after seeing such a horrible event?
But think twice.
The phrase 危机 (wei ji) in Chinese for “crisis” is comprised of 危, danger and 机, opportunity. If you think you are smart, powerful or rich, is it time for you to turn the danger into an opportunity? It doesn’t simply mean you should immediately buy stocks to help the markets recover, so people may feel better and more hopeful about the economic outlook for Asia, but you need a plan to figure out what to do next.
So, what’s next? There won’t be any earthquake-like shock for Asia’s capital markets, I say.
Takuji Okubo, Chief Japan Economist for French bank Societe Generale, said in a research note to clients that the Japan earthquake would have a negative impact on regional equities markets over the short term but in the long run, it may help Japan’s economy grow, given the government’s big efforts to rebuild infrastructure, homes and so on.
What does that mean to China? Can Chinese materials and construction companies help? Because of growing concern about nuclear radiation, food safety is becoming another big challenge for Japan, especially to exports and this may be another angle worth studying about what a role China can play in and after the crisis.
We won’t be always in danger so your opportunity should come in next.
George Chen is a Reuters editor and columnist based in Hong Kong.
Photo: A man steps over a crack in the road as he walks towards the devastated area of Rikuzentakata, northern Japan after the magnitude 8.9 earthquake and tsunami struck the area, March 13, 2011. REUTERS/Lee Jae-Won