A month ago, Shinzo Abe was successful in his quest for a
second chance to be Japan's prime minister (he previously held
the premiership, but resigned due to health reasons). The
tough-talking Abe has been a boon for investors in an array of
, ranging from the iShares MSCI Japan Index Fund (NYSE:
) to the WisdomTree Japan Hedged Equity Fund (NYSE:
) to the ProShares UltraShort Yen (NYSE:
Abe's victory has also brought new life to uranium funds, a
sub-segment of the ETF universe that was cast aside following the
natural disasters that ravaged Japan in early 2011. By now,
plenty of investors know the tales of woe pertaining to the
Global X Uranium ETF (NYSE:
) and the Market Vectors Uranium + Nuclear Energy ETF (NYSE:
In February 2011, URA traded above $22. By June 2011,
following the horrific earthquake and tsunami that hit Japan, URA
had been cut in half. URA tried to rebound, even getting back
above $10 early last year, but on November 15, roughly the same
time it became apparent Abe was running again, the ETF was found
NLR's story is similar. That ETF traded above $27 in February
2011 before sliding below $15 by the end of that year. As was the
case with URA, there was an early 2012 rebound. Now, NLR's $15
print in late 2011 looks pretty good because the ETF closed at
$14.65 on Tuesday.
Now, it appears as though the darkest days faced by NLR and
URA are in the past. Abe's victory has a lot to do with that.
Since December 14, just days before Abe and his Liberal
Democratic Party swept to victory, URA has surged 15.4 percent.
NLR has added 5.6 percent.
Of course, it helps that Abe is pro-nuclear energy whereas the
administration his replaced was not. If Abe approves restarting
some of Japan's nuclear reactors later this year, a massive
uranium inventory overhang that has plagued spot prices of the
commodity could be wiped out.
Uranium prices are forecast to range from $45 to $62.60 per
ton after averaging less than $49 last year,
according to a Bloomberg survey
The bull case for NLR, URA and their constituents extends
beyond Japanese politics. Since prices have plunged over the past
two years, producers have scaled back production. In a perfect
world for NLR and URA, reduced supply and increased demand would
meet at the same time, spurring these
to further upside. That scenario is possible, particularly if
Japan renews its interest in nuclear energy.
It is also possible without Japan. Combined, China, India and
Russia have plans for nearly
nearly 130 nuclear reactors
. Bangladesh, Turkey and the United Arab Emirates are among the
other developing nations expecting to bring nuclear power plants
online over the next several years.
Inflows to URA indicate investors are warming to the idea of a
uranium renaissance. According to data provided to Benzinga by
Global X, URA's issuer, the ETF had $120 million in assets under
management on December 13. That number popped to $129 million on
December 17, the day after Abe's victory. As of January 15, the
ETF had over
million in AUM
The near- to medium-term outlooks for uranium equities and
ETFs such as NLR and URA still revolve around the aforementioned
factors of Japan and rising prices. Should both scenarios work
out favorably, URA trading with a price-to-book ratio of just
0.69 could be a steal.
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advice. All rights reserved.
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