Should The Recent Miyazaki 7.1 Magnitude Earthquake Affect My Investment In ParkwayLife REIT?

Do note that this is not investment advice, and definitely not any recommendation to buy or sell, because even I myself do not know what I should and will do.

The recent magnitude 7.1 Miyazaki earthquake that rattled southern Japan on 8th August 2024 serves as a stark reminder of the potential for a far more devastating event - an earthquake along the Nankai Trough.  The situation is also brought into world-wide attention due to the megaquake advisory released by the Japanese Government.  This region, known for its seismic activity, has a history of producing "megathrust" earthquakes, with the last significant events occurring in 1944 (Tōnankai Earthquake) and 1946 (Nankai Earthquake).  These quakes, which occur roughly every century, could potentially reach a magnitude of 9, resulting in catastrophic damage.  

Experts estimate there is a 70 to 80% chance that a magnitude 8 or 9 earthquake could strike the Nankai Trough within the next 30 years.  If such an event were to occur, the consequences would be dire: trillions of dollars in damage, tens of thousands of lives lost, and a massive tsunami devastating the Pacific coastline.  The 1707 Nankai earthquake, which ruptured the entire 600km length of the trough, was followed by the eruption of Mount Fuji, demonstrating the destructive power of these seismic events.

Despite the ominous warning, predicting the exact timing of such an earthquake remains an elusive challenge.  While Japan's Meteorological Agency issued an unprecedented alert following Thursday's quake, the scientific community remains divided on its significance.  The warning, intended to prompt preparedness rather than panic, reflects the uncertainty that still surrounds earthquake prediction.  Nonetheless, the issuance of such an alert has had a tangible impact on local communities.  Across Japan's Pacific coast, residents and officials alike are taking steps to ensure preparedness.  Evacuation shelters have been opened, emergency protocols have been reviewed, and households are checking supplies in anticipation of what might come.

The specter of a magnitude 9 earthquake looms large over Japan, a nation all too familiar with the destructive power of natural disasters.  While the exact timing of the next major quake remains uncertain, the possibility is undeniable, and the consequences could be catastrophic.  This uncertainty, in turn, makes me jittery about my investment in ParkwayLife REIT (PWLR).  PWLR has about 60 nursing homes located all over Japan.  If we look back into history to see how a massive earthquake impacts the performance of PWLR, the most recent disastrous earthquake that knock fears into myself as an investor is definitely the 11th March 2011 magnitude 9.0 Tōhoku earthquake and tsunami, that later led to the Fukushima Daiichi Nuclear disaster, whose repercussions remain till today.  

Based on the historical share price, the impact on PWLR in 2011 was minimal as the price corrected by slightly more than 11% from SGD 1.76 to a low of SGD 1.56, and it recovered soon after.  This fast recovery could be due to the fact that the impact was more localized to the north-eastern part of Japan at that time, and the prompt rescue and recovery measures taken by the Japanese government to control the scale of the damage.  However, the concern today is that if the powerful earthquake due to the Nankai Trough happens, the destruction will be felt all over Japan, and the impact to PWLR will be much more severe as the populated areas in Japan will be directly impacted by the disaster.  This worry will be amplified by many times if the tremor led to the volcanic eruption of Mount Fuji, which is the exact same scenario that happened in 1707.  

This is a troubling post, as this uncertainty of a massive natural disaster, which seem inevitable in the next 30 to 40 years, are going to have a disastrous impact on the lives of many Japanese and many others around the region, especially those around the Pacific Ring of Fire, including Philippines, Taiwan, the Hawaii Islands etc, but here I am, worrying about my investments.  Sincerely, I hope such a disastrous event do not happen in my lifetime as I do not wish to see a disaster of such scale unfold before my eyes, and I do wish everyone safe and sound.  On a personal note, I also wish that my investment remains profitable.  However, just as the Japanese Government is tirelessly and responsibly preparing their people on what is to come, I think I should also be responsible to my own finances and be prepared on what may come.  

Besides PWLR, I also hold other investments with interests in Japan, namely Mapletree Logistics Trust and Mapletree Industrial Trust.  I do not think anyone can predict when the cycle of the massive earthquake will hit.  Since it is something I cannot control, I will just have to do what I can.  On matters I cannot do, I will have to put the faith and trust on both the Japanese Government and the manager of PWLR.  The Japanese Government and relevant agencies are very experienced in various measures that will help to minimize and mitigate the severe impact by natural disasters.  In addition, manager of PWLR had also secured insurance for their properties against natural disasters.  I have no idea to what extent is the protection by the insurance, but I believe the manager had done, and will do what they have to, to protect the interests of shareholders as much as possible.  

On what I can control, diversification is probably the only thing I can do.  Limit the composition of each company/ REIT that I hold in my portfolio to a maximum of 10%.  That will help to spread out the risk to my portfolio and every uncontrollable negative impact will remain manageable.  As such, I shall just remain calm, and remain vested.  Always remain cautiously positive and yet be prepared for the worst.  Barista FIRE, here I come...!