The Mixed Impact of Japan＇s Earthquake on Asia

Published:2011/3/22 21:45:00 Author:LiuQiaoyan From:SeekIC

Many investors in Asia have been rushed to evaluate the possible effect upon companies in other Asian countries besides Japan led by the 9 magnitude earthquake in north Japan last Friday. People in Japan are still suffer from the aftershocks and the threat of radiation leakage from the damaged nuclear plant in Fukushima.

Nomura Securities Research, One of the research houses, has released reports that analyse the likely impact of the earthquake on other parts of Asia recently. According to the report, industrial production in the distressed area take up to 6.8 percent of Japan’s total industrial output. Nomura Securities Research said that they have predicted the possibilities of major impacts, which involved farming, forestry, fisheries, mining, food manufacturing, ceramics, primary metal such as steel, manufacturing, electrical machinery, precision equipment, and public utilities. Compared with the aftermath of Kobe earthquake in 1995, It seems this time the situation is more severe and the disaster will have greater impact on economics considering the major disruption of infrastructure such as roads and electrical power generation facilities. Another characteristic of the affected region is the large amount of IT-related industry.

It is still too early to fully assess the full impact of the catastrophe. Most research houses agreed that the earthquake should have short-term impact on regional stock exchanges only, as Nomura Securities said they expect the event to have a short-term impact on the market around the Middle East with existing unrest, higher inflation concerns and the peripheral Europe.

As for sectors, the construction sector is widely believed to perform well to meet the demand for infrastructure reconstruction, while the insurance sector will perform not so well on concerns that insurance payout will cause reduction of earnings, some other sectors in Japan may also have spillover effect upon related sectors in Asia as a result of the earthquake, which could be either positive or negative. Especially for the energy sector, a total of 11 nuclear reactors were shut down along the north-eastern coast of Japan after the disaster.

As there are a number of semiconductor factories in the disaster area halted operation in the wake of the earthquake, Nomura Securities also worry about the disruption of the IT supply chain such as handsets and personal computers. The most affected is the supply of memory chips and to a lesser extent LCD and Battery. As a result, to avoid worse affect on their production, electronics manufacturers in Asia have to source these components from elsewhere.
Indeed, the ultimate impact of the earthquake and tsunami may get even greater potentially. The related integrated circuit is LM2002.

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