Curtis Freeze, founder of Prospect Asset Management Inc., which manages $280 million and has been investing in Japan for more than two decades, comments on the impact of the earthquake and deadly tsunami on Japanese stocks.
On market reaction:
“We’ve seen the lows. We have had a strong bounce since the lows of last Wednesday morning. We might have volatility going forward. There will be good news followed by bad news, but it’s good that we’ve been through the worst as far as the market is concerned.”
On the long-term impact:
“There will be spending required, there will be companies that benefit from that spending. On a personal level it’s very hard for the people affected. On a corporate level, it’s very brief, the impact should last about three or four months. We will have downward revisions and most of those will be out of the way in this March year-end set of results. Companies will make plenty of allowances for whatever the impact is when they announce the results over the next few months.
“The forecast for next year of course will be fairly positive. That’s one reason we’ve digested the impact; it’s in the price so to speak. Companies’ results will reflect whatever allowances need to be made. Next year will reflect the recovery and the spending on the recovery.”
On the impact on companies:
“Construction-related companies rebuilding the roads, bridges, the housing” are set to benefit.
“Real-estate stocks have been hit overly hard. Most people in Tokyo were relieved how little impact there was on housing in Tokyo, on real estate in Tokyo; very few buildings were damaged. Demand for housing, condominiums, real estate office will be quite firm. These stocks are still lagging the bounce. Many of them are still down 20, 30 percent from prior to the quake. The survey of Tokyo real estate particularly the real estate owned by the major real estate companies, and also the real estate in REITs shows there’s been almost no effect on those properties.”
“The construction stocks have had a run so I wouldn’t chase them at this point.
“The housing stocks are much more interesting.”
Freeze said he’s been buying shares in “single-family housing companies in Tokyo” including Iida Home Max.
“None of their housing projects have been affected. They haven’t been hit directly by the quake. The worry is of course consumer confidence, will people buy housing after the quake. And I think the answer is yes.”