The Tokyo stocks plunged on the Tokyo Stock Exchange on Tuesday with general selling among fears of a serious economic impact of Japan’s earthquake. The Nikkei average was below 9,000 for the first time in more than six months and at one point the Nikkei 225 index dropped more than 14 percent but closed at 8,605.15 points on Tuesday, the lowest in nearly two years. On Monday, the key market gauge fell 633.94 points, the biggest drop in almost two years and five months
According to Ed Merner, president of Atlantis Investment Research Corporation in Tokyo and Portfolio Manager of Atlantis Japan Growth Fund, many investors are panicking because they don’t know what will happen in the current situation.
“They don’t know how bad the meltdown is in Fukushima,” he said. “Is it serious, is it slightly serious, is it very serious or nothing to worry about at all? What’s more, lower stock prices mean more margin calls. In other words, it is spiraling downwards. And more bad news will mean more selling and lower prices, which currently is happening.
In the best case scenario, he says, the panic will subside, investors will become more optimistic and the stock market will slowly recover. The market is now oversold and people have overreacted to the bad news.
“We can except the market to recover and bounce back up in the next couple of days,” Merner says. “For long-term investors this is an opportunity that comes along only once in 10 or 20 years. This is a Warren Buffet type market.”
Meanwhile, Japan’s central bank injected $245 billion into the money markets Tuesday to help calm financial markets, according to reports. The move was to help ensure that banks have enough liquidity to meet the rise in demand from companies and households looking to raise funds. The fund injection came as Japan’s nuclear crisis deepened on Tuesday.