The 9.0 magnitude earthquake rocks Japan and the rest of the world. Nuclear power plants in Fukushima damaged in the earthquake and aftershocks, with apparent radiation leak.

Japan stocks slumped on the subsequent two trading days, falling 6.2% and 10.6% on 14 March and 15 March respectively. This was the worst two-day decline for Japanese stocks since 1987.

The singapore and the world stocks are not spared too. STI has since dropped 4.5%.

Nikkei 225 One Year Performance (Source: Bloomberg)

While many newspaper articles and financial analysts have published their views that the stocks are at bargain level, investors should stay wary. The optimism is probably due to the sharp rebound of Japan stock markets for the past two days and relatively calm reaction of other global markets.

However, there are few factors investors should consider:

  • The nuclear damage is still uncertain. While it is reportedly under control, any further “not so good” news, like where the nuclear cloud is heading, will push the fragile markets to extreme level.
  • There is still little knowledge of the consequences of the radiation. While market may have short term rebound, the disaster will certainly hit the economy in the medium to long term.
  • The catastrophe seems to have overshadowed the unrest of Middle East, which may have greater impact on global stock markets, especially when UN has taken military actions

Nikkei 225 Performance after 1995 Earthquake (Source:

Historically, it takes months for the markets to be stablized after Japan’s 1995 Earthquake. The current situation is much tougher given the complications of nuclear damages and unstable global environment.

While it is tempting for some investors to catch the falling knife, Vigilant attitude should be adopted. Instead of directly rush into the markets, systematic strategies and proper asset allocations should be used. Investors should uncover the countries and sectors which would be more suitable for the current market.

About the Author

Ivan Guan is the author of the popular book "FIRE Your Retirement". He is an independent financial adviser with more than a decade of knowledge and experience in providing financial advisory services to both individuals and businesses. He specializes in investment planning and portfolio management for early retirement. His blog provides practical financial tips, strategies and resources to help people achieve financial freedom. Follow his Telegram Channel to join the FIRE community.
The views and opinions expressed in this article are those of the author. This does not reflect the official position of any agency, organization, employer or company. Refer to full disclaimers here.

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