Post-Japan Disaster: After Timber, it's Glove Sector?

As per our previous posts (How Should Investors trade after the Japanese Disaster?), we wrote about timber counters, and it's proven the right sector investors should look at. And, below is the performance of those mentioned counters.

www.financemalaysia.blogspot.com

All of them outperformed KLCI, which recorded -2.20%. Why WTK outperformed its peers? Simple answer is its cheaper share price and better liquidity. In fact, TaAnn and WTK is the main focus because they export 80-90% of their products to Japan. This puts them in the limelight of stocks investors should look at for the moment.

Why should you look at Glove sector next?

After timber, glove sector should outperformed the generally weak market sentiment. Investors are scared. Those who already bought was stuck-in there. Those who already sold was staying sidelined. And, those who dare to buy now is focusing on timber stocks only - and today glove.

Main reasons were:

1. Demand for medical glove is expected to increase substantially. After the disaster, Japan should be facing another problem - outbreak of diseases. Because of the wet and dirty condition after tsunami, diseases tends to spread easily and this could intensify the demand for gloves being used by medical personnel and public in general.
2. Stronger USD. One of the setback for our glove makers is weakening of USD which could harm the export market to US. Post-Japan disaster, USD was expected to strengthen in line with "flight to safety" strategy employed by global investors. This is an advantage, or in fact, the turning point for our glove makers.

www.financemalaysia.blogspot.com

With these two important factors, glove sector should be on investors' radar in the near future. Indeed, you do not have much choice in this kind of market where everything seems going down hill. Either you stay sidelined, or brace the storm to invest in these counters. And, my personal stock-picks would be Supermax due to its attractive valuation and good liquidity.

Finance Malaysia urged all Japanese to stay strong, and we will support you from afar. We are living in the same planet. We are 1 actually.

How should investors trade after the Japanese Disaster?

Special edition from Japanese Earthquake on 11/03/2011 (black Friday?).

Duped as Japan's deadliest disaster in more than a century, 10m high tsunami crushing on the coast line, and yet to be confirmed - world's worst nuclear disaster in 25 years. I'm sitting in front of computer screen, reading the news while monitoring the share market that Friday. The more I read, my heart is bumping faster, and the share market is going downhill.

Modified Tsunami picture

In fact, KL is raining for whole day, signaling the bad situations would appeared somewhere, and it materialized in Japan shortly. In the morning session, KL market is rather quite. I asked myself: "Today, traders are still in bed due to the favorable sleeping weather?".

To recap, below is the performances of major market on Friday.

Bloomberg

What should investors do?

And, how should investors trade going forward?

Personally speaking, I don't think this is a good time to accumulate. We never know the bottom. Catching the falling knife is very dangerous, and it's not worth to take the risks. Let's gauge it with the previous major earthquake in Japan, the 1995 Kobe temblor. According to Macquarie Group Ltd, Japanese stocks fell 8% in the week after Kobe temblor.

Meaning, with 1.72% down on last Friday,  there is another 6.28% to go. But, the aftermath is more serious this round, thus, at least 10% slump is justifiable. Japanese yen strengthen considerably on Friday, as investors pull money out from share market and into government bonds or money market.

Sorry to say that the Japanese outlook is very bleak currently. Being the world's most indebted country, and with a negative growth in 4Q2010, Japan needs time to rebuild and time to restore investors' confidence.

Malaysia timber companies to do well?

However, timber companies should do well in the expense of Japan's disaster. Stocks to watch is Ta Ann, WTK and Jaya Tiasa. Japan is the single most important market for local timber companies. As such, the main catalyst for timber sector now is the reconstruction of affected area in Japan in the coming months.