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Japanese Nikkei Hits 26-Year Low: Stock Market Bargains Galore …

Stock-Markets / Japanese Stock Market Nov 04, 2008 - 11:58 AM GMT

By: Money_and_Markets


Best Financial Markets Analysis ArticleTony Sagami writes: Black Monday, October 19, 1987, seems like a long, long time ago, doesn't it? The Dow plunged from 2,246 to 1,738, losing a whopping 22% in a single day.

I was a retail stockbroker at the time. And it was ugly. Really ugly.

Now I'm starting to hear lots of comparisons and concerns that we might be moving towards another 1987-type drop.

I do believe that the U.S. market is headed for more trouble. Yet the Dow is still five times higher today than it was on Black Monday.

The Japanese, however, can't say the same thing about their market.

The Nikkei 225 Average Hits a 26-Year Low …

The Nikkei has lost more than 20% of its value in the last month and is down by more than 40% for the year, capped by a 9.6% one-day loss last week. That put it lower than it was back in October 1982.

Things are so bad in Japan that its new Prime Minister, Taro Aso, described what is happening as “a harsh storm seen only once in 100 years.”

Aso, who has been in office for less than two months, is combating Japan's economic weakness with an aggressive stimulus package to prop up the stock market and stimulate consumer spending.

The package includes:

'A harsh storm seen only once in 100 years.' – Japanese Prime Minister Aso
“A harsh storm seen only once in 100 years.”
- Japanese Prime Minister Aso
  • 2 trillion yen of direct payments to every Japanese household. A family of four will receive a check for 59,454 yen (US$600) to encourage consumer spending …
  • 5 trillion yen in new government spending on infrastructure and public works projects …
  • 2 trillion yen for a bank rescue payment to encourage small business lending …
  • Cutting expressway tolls …
  • New tax breaks for mortgage loans …
  • Extending a tax cut on capital gains, and …
  • Tax credits for child and elder care.

Will the Japanese government's stimulus package work? Only time will tell.

But I Think There Are Now Plenty of Bargains in the Japanese Stock Market!

If the Dow dropped to its 1982 lows, it would be at 895 today. Yes, 895!

Thank goodness our market has held up better than that. But what would you do if the Dow was below 1,000?

Would you sell everything and head for the hills? Or would you consider it to be the buying opportunity of a lifetime?

I'll tell you what I'd do: Jump in with both feet and buy, buy, BUY!

And right now, I'm suggesting that Japan represents a similar opportunity.

If you agree, here are …

4 Ways to Invest in Japan …

  1. Japanese Mutual Funds : There are dozens of no-load mutual funds that invest in Japanese stocks such as T.Rowe Price Japan (PRJPX), Fidelity Japan (FJPNX), or the Japan Fund (SJPNX).
  2. Japanese ETFs : If you're more of an exchange traded fund investor, there are several ETFs that focus on Japanese stocks such as iShares MSCI Japan Index Fund (EWJ), WisdomTree Japan Total Dividend (DNL), streetTRACKS Russell Nomura Prime (JPP), and streetTRACKS Russell Nomura Small (JSC).
  3. Japanese stocks listed in Tokyo: It's easier than you think to invest in Japanese stocks thanks to discount brokers like E*Trade. You can trade on six different foreign markets, including Japan, at E*Trade for only $21.95 per trade. You don't have to open a fancy or complicated account either.
  4. Japanese stocks listed in the U.S.: You may not realize it, but there are dozens of Japanese stocks that are listed on the New York Stock Exchange or Nasdaq.

    Examples include: Canon (CAJ), Hitachi (HIT), Honda (HMC), Kubota (KUB), Mitsubishi Financial (MTU), Nintendo (NTDOY), Panasonic (PC), Toyota (TM), and Sony (SNE).

Let me tell you a little about Sony …

Sony just reported a 72% drop in third-quarter profits and chopped its forecasts for the rest of the year.

That's because Sony, like all Japanese exporters, is suffering from lower global demand and a rising yen. A stronger yen hurts exporters by raising the price of their goods overseas, reducing the yen value of profits earned abroad.

What's more, Sony's stock has taken such a thumping that it is now trading for less than its book value. Yup, the value of all of Sony's buildings, equipment, land, and other physical assets is worth more than its total stock value!

In fact, the market value of all of Sony's shares is around $21 — about 60% of its underlying book value.

Sony isn't the only Japanese stock trading below book value, either.

Am I suggesting that you rush out and buy a bunch of Sony or any other Japanese stock?

No. Only you can decide what's right for your own portfolio and investment needs. As always, you should do your own research before you make any decisions.

But I DO suggest you take a very close look at Japan right now. Because a few seeds planted there could grow into some mighty big winners in a few years.

Best wishes,


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