Japan Stock Review

OK, this is just a general note about a basic peek at Japanese stocks. Neither broad nor deep.

I’m going to put up a chart of two auto makers, HMC Honda Motor Corp, and TM Toyota Motors along with one electronics company SNE Sony and a broad fund EWJ. These are compared to the benchmark S&P 500. What we see is them fallling off a cliff, a tiny ‘blip’ up, and then a bit more roll down.

Selected Japanese Stocks: TM, HMC, SNE, EWJ

You can click the image for a larger version.

It’s pretty clear that things are “not good” yet. RSI is “hit 20” and up some, but needs that second dip and ‘higher low’ before it’s an entry. Prices have dropped way below the SMA stack, so the up run will likely stop at the bottom side of the SMA stack (Usually the 50 day middle line) whenever a bounce in ernest begins. It must CROSS the SMA stack and return to it from the topside to have a new uptrend, untill then, it’s just ‘dropping to bottoming eventually’…

MACD is “way low” below zero and DMI is “red on top” with ADX saying “dropping in force” (though it is a slow indicator so will not call a new up run right at the bottom… still, you want ‘late in, early out’ for maximum safety with gains).

So this thing is saying “it ain’t over yet”. WHY?

Perhaps TEPCO

From:

http://finance.yahoo.com/news/Japan-mulls-Tokyo-Electric-rb-1693732419.html?x=0

Japan mulls Tokyo Electric nationalization

On Tuesday March 29, 2011, 2:55 am EDT

By Mariko Katsumura

TOKYO (Reuters) – Japan may nationalize Asia’s largest utility, Tokyo Electric Power (Tokyo:9501.T – News), as it struggles with the financial costs of the country’s worst nuclear disaster, a move that would please bondholders but hurt shareholders who would likely lose out.

Imposing state management is one option that Japan is mulling, National Strategy Minister Koichiro Gemba said on Tuesday, as the costs of compensating businesses and households affected by leaking radiation and the expense of repairing crippled nuclear reactors looked set to soar.

When folks start talking about nationalizing, smart money runs like hell for the border and asks quesitons later. Even if unwarranted, that’s what happens. So TEPCO has lost 70% of it’s market cap on the Tokyo stock exchange and is up to it’s eyeballs in alligators. So much so that nationaliztion is looking like a good option…

Notice the “costs of compensating”. What is the liability of the company for all the evaculations and the rolling blackouts that have come as a consequence of their nuclear failure? Functionally unlimited…

At the same time, the utility’s ability to pay has been hobbled by a fall in generation capacity that is causing rolling blackouts that are expected to last for weeks if not months.

And how do you make cars and semiconductors with rolling blackouts?

HEAVY DEBT LOAD

Even before compensation claims are filed, the crippled former state-owned utility faces higher costs.

Nomura Holdings analyst Shigeki Matsumoto said this month that TEPCO will have pay more than $1 billion every month on alternative fuels to make up for lost capacity. With reactors likely to be off line for a long time, that expense will mount.

TEPCO took almost two years to restart reactors at its Kashiwaki-Kariwa plant after an earthquake there halted generation in 2007 although the damage was far less severe that at Fukushima, Matsumoto said.

With the Fukushima plant still spewing radiation the eventual bill could easily outstrip TEPCO financial resources. The crisis appeared to escalate in the past few days with plutonium found in soil on Tuesday, rattling already shaky financial markets.

Got that? $1 Billion a month in fuel costs. Perhaps for years. (Ambiguous as to how many reactors will be shut down how long, though)

Tokyo Electric shares were untraded due to a glut of sell orders at 566 yen, down 19 percent from Monday’s close. The company has lost about $30 billion in market value since the March 11 disaster.

The spread on Tokyo Electric’s 5-year credit default swaps widened to a record high of 475 basis points on Monday on Markit, against just 40 points before the crisis.

The utility, which provides power to about one-third of the Japanese population, had 432 billion yen in cash and equivalents at the end of December, according to its financial statements.

Of its roughly $61 billion in outstanding bonds, the company is due to repay $4.8 billion this year, and another $5.6 billion in 2012, underscoring the importance of refinancing to meet its funding needs. ($1 = 81.705 Japanese Yen)

OK, it lost $30 Billion and that was 70%, so what remains us under $15 Billion of market cap. It powers about 1/3 of the country (so a lot of other companies depend on it) and has all of about $5 Billion in the bank. (So hit’s the cash wall in about 4 to 5 months on the added fuel burn alone…) AND it’s got $61 B in bonds and is supposed to cough up another $4.8 Billion to pay off some of them. So the answer is to put that load onto the banking system…

See where this is going? Sweep it under the debt rug?

I don’t think this is going to work out well. So the question then becomes: “For how long will the country be run electrically hobbled on a fuel debt credit card as the government tries to make decisions?”

Yeah, that can make it hard to run a car manufacturing company or ship TV sets…

Watch, don’t touch, other than fast day trades on a 10 day chart.

Subscribe to feed