Why Rising Bond Yields Mean You Should Buy Japanese Oil Companies
Today there are two major trends that will benefit a small sector little more than any other sector.
First of all let me tell you the trends so that you can connect the dots then I will give you a way to invest.
The first trend is what we know very well. The trend goes like this, when interest rates in US goes up, the Japanese stock market tends to over perform.
It is quite obvious from the data collected .Hence right there is no doubt that United States bond yields are rising.
Japanese stocks and U.S. bonds do not appear to be highly correlated, but one of the main reasons benefits bond yields of Japan is that increase in U.S. rates puts downward pressure on the Japanese yen, making Japanese goods relatively cheaper around the world.
There are other factors causing the same but in simple words this is how it works.
With that we come to the second trend, which most of you strongly disagree with: Increase in oil prices.
There are many reasons why oil prices are rising- may be trillions. Let me not go into details of all of them, but in short, around one billion people in china will be consume more and more oil in the near future.
Trillions of dollars are getting printed by the United Federal Reserve to deal with the slowed growth. Energy Economist Jeff Rubin says that “The fiscal stimulus is not a substitute for cheap oil.”
Both the above factors and several others will contribute to increase in the oil prices.
And the obvious conclusion is search for Japanese Companies with upside leverage to increasing oil prices.
Here I found one. It is a specialized sector of oil production: drilling in deep water. Most people think of best way to benefit from increasing oil prices is Exxon (NYSE: XOM) or BP (NYSE: BP). However, companies tend to be as large and diversified that delays progress in the price of oil.
Finding companies that make more profits with the increase in the price of oil is the best way to profit from higher oil prices.
I suggest you not to get too excited before I tell you name of this company. It is quite unfortunate that the company only trades on the Tokyo Stock Exchange which may restrict your brokerage firm from buying this company’s share.
It’s Nippon Yusen KK (9101: TYO).
They are one among topmost shipping companies of Japan, they started dealing with oil production very recently.
50% stake has been bought by them in the world’s second largest deep offshore oil tanker company around two months ago.
Around 24 highly specialized tankers are operated by this company that is exclusively designed to transport oil from deep sea drilling platforms and ships to the mainland.
These specialized ships are popularly known as moving pipelines, as they provide unbeatable and outstanding services.
If you are allowed to trade in Tokyo exchange, then I will recommend you to pick up small stake right now.