Hi all,
 
Since the market turmoil happened in August, things are shifted. November is also not a good month. Paul taught me one thing, when things are expected by most people, things won't happen. So I have told you individually that oil won't reach 100 eventually and it may even tumble without notice.
 
Actually, since I seldom touch HK or Chinese stocks, my dad said I should follow or I missed the chance. When I was about to buy A50, he told me it is overpriced already... Well, after all, I'd better stick on my old trail for my treasure hunt. Want to talk about other things, but I should summarize the Yen vs USD story first, since it is something I learnt this year and find it really useful.
 
First, Yen vs USD is depending on the economy. When US econ is good, people borrow yen (carry trade) and yen becomes weak. In August, when dow jones fell from 13,657 (8Aug) to 12,845 (16Aug), USD vs Yen fell from 119.7 to 113.1. Can see, about the same amount of fall happened (~6%). The beta of course cannot be unity, however, in this environment; Carry Trade does affect both US and Japan market.
 
In the course of 5 years, Yen is bouncing between 104 (Jan05) to this year 123 (Jun07). Instead of looking into the currency itself or US companies, we can understand the similar pattern is affecting some Japanese companies. Many Japanese companies have the similar properties, strong in export and have abundant cash. They are much secured after 80s, they are protected from buyout by having lots of cash in hand. Even China is now becoming the number one export country for Japan, US is still counting on 20% of their total export. Therefore, if we take out the fact that Japan market is very sluggish or is dead water (NIKKEI fell 7% from beginning of the year), the currency rate would give some ideas on how some major Japanese ADRs (America Depository Receipt) go.
 
In order to find some major Japanese exporters ADRs, we can first take a look of the holdings of some Japanese Funds, I took iShares MSCI Japan Index (EWJ) as an example:
CANON INC.
HONDA MOTOR
Mitsubishi
Mitsubishi UFJ Financial Grp
Mizuho Financial Grp
Nintendo
SONY CORPORATION
Sumitomo Mitsui Financial Grp
Takeda Pharmaceutical
Toyota Motor
 
Can see, the famous exporters are: Canon (CAJ), Honda (HMC), Sony (SNE), Toyota (TM) and Nintendo (NTDOY). I have been tracing them and their news for more than a year. Here are some ideas I have for the companies:
 
Canon (CAJ): Very R&D oriented company; they hold the more patents than any other company in the world. Professional and Medical optical devices are their strength
Honda (HMC): Japan number two, their environmental vehicles hit the market, strong sale in recent quarter.
Sony (SNE): They do everything well but PS3, good in LCD, OLED, Blue-Ray and Cybershot; IPO their insurance arm in Nov. They can meet this year 5% profit margin target.
Toyota (TM): They once surpassed GM as number one car manufacturer in the world, always ranked at top as having the most safety models. However, recently some citing their cars have defects.
Nintendo (NTDOY): Wii conquered the world, and fit board is coming, even a company made Wii games IPO in Japan broke the record; market cap surpassed Sony.
 
Those are very large companies and normally their stock price won't fluctuate a lot, but highly dependent on the exchange rate. At the same period of time in Aug, when USD vs Yen fell 6%, all of them fell from 6%-8%. I cannot make long term prediction, however, to compare stocks which would rise 50% and fall 50%, I can call that those companies have a currency shield if currency is on their side.
 
In November 26, USD vs Yen reached this year low at 107, therefore, if USD rose to 115 would mean 7% rise (now is already 111, still have 3.5%). A sufficient rate cut and a traditional year end boost would mean Carry Trade more active. USD vs Yen goes back to 115-120 is not difficult to achieve. Currency shield? You make your own estimation. However, I find it comfortable with those I committed when it was 107.
 
I want to talk about another Treasure Hunt in a short time (Solar Cell companies), and I think I won't talk much about Japanese companies, even I am working at one myself, as they are not so fascinating :P I have invested all 5 companies mentioned in either stock or options, I will definitely sell all if USD reaches 120Yen again, that's all. (Nintendo?... hmm... maybe eventually I will keep a little myself, hope it will give me not only Wii but NDS + Games... ha~)
 
Cheers,
Eric