By Tom Bradley

As the Japanese disaster unfolds, we are dealing with many cross-currents in the capital markets. The pictures, dramatic news stories and unknown nuclear dangers are all part of a mix that has the potential to create an overreaction by investors.

In our case, we are watching the situation closely given the global nature of stock markets and the fact that we hold 8 Japanese stocks in the Global Equity Fund (Bridgestone, Fujitsu, Kajima, Panasonic, Mizuho Financial, Mitsubishi, Sony and Yamaha Motor).

We haven’t had a lot to say so far because we’re letting the analysts at Edinburgh Partners (EPL) do their thing. They’re assessing the extent of the damage to the companies’ productive capacity and factoring that into their earnings estimates. Clearly the power cuts, rationing and general disruption have shut down offices and facilities this week, but the impact on longer-term values is less clear. As we’ve noted before in situations like this, asset write-offs and short-term operating losses are real, but unless they have a lasting impact on a company’s market position (which may be the case in some situations), they will have very little impact on a company’s long-term value.

We don’t yet know if EPL will make any changes to the portfolio, Japanese stocks or otherwise, as a result of the earthquake. Further updates to come.

Note: As of yesterday's closing prices (March 15), the Global Fund is down 3.3% over the last three trading days and is now down 2.4% year-to-date.

(The indicated rates of return are the simple returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Past performance may not be repeated)