Stock Investors Standing on Sidelines in Asia

Stock Investors Standing on Sidelines in Asia

Trading Volumes in Tokyo, Sydney, Hong Kong on the Decline This Year

MIA LAMAR, BRADFORD FRISCHKORN and DAVID ROGERS

Updated May 23, 2014 4:17 a.m. ET

Stock market investors are known to “sell in May and go away.” In Asia, they booked their tickets early.

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In Tokyo, stock-trading volume has fallen each month this year, while in Sydney turnover remains more than 30% short of its monthly average with a week to go in May. In Hong Kong, turnover is also running below average 2013 levels and set for a monthly drop. The three markets are Asia’s biggest excluding mainland China, which is largely closed to foreign investors.

“The global money is definitely not looking at Asia at the moment,” said Andrew Maynard, global head of trading and execution for brokerage CLSA, which is owned by China’s largest brokerage, Citic Securities Co.600030.SH +1.60% “There’s more value to be had in Europe and the U.S.”

Traders say the resilient performance of the U.S. stock market despite patchy economic readings is the chief reason for investor indifference to Asia, where the region’s two largest markets, Japan and Hong Kong, have been in the red for months. Japan’s Nikkei 225, down 12%, has yet to break into positive territory for the year.

Smaller markets such as Indonesia and Thailand have done well but investors see few reasons to invest, with political and economic risks still running high and the U.S. market holding up. Stocks in Thailand fell Friday after the military ousted a caretaker government following months of political unrest.

An average of 58.84 billion Hong Kong dollars (US$7.59 billion) has traded daily in Hong Kong so far this month, down 9.4% from April and below last year’s levels, when turnover ran at about HK$62 billion a day. Public holidays at the turn of the month damped some activity. A representative for Hong Kong’s stock exchange said turnover is determined by factors that are largely out of the exchange’s control, so “we think it is important to look at it from a longer-term perspective.”

Investors haven’t missed much. The blue-chip Hang Seng 0011.HK +0.32% Index has closed flat three times in the past week, on Wednesday notching a minuscule 1.84-point gain. The index closed Thursday at 22,953.76, down 1.5% for the year.

Traders and investors say the sudden global selloff of highflying “momentum” stocks has increased caution on the city’s once red-hot Internet and casino shares. The slowing Chinese economy also continues to take a toll on the market following data indicating mainland developers are selling fewer properties and home-price growth is slowing.

“What is created is a market somewhat uncertain and polarized about where the future is going to be,” said Irene Goh, a senior portfolio manager for AllianceBernstein in Hong Kong. For retail investors in particular, the momentum selloff was a “wake-up call,” Ms. Goh added.

Hong Kong isn’t the only market struggling in Asia. After helping drive Japan’s Nikkei 225 index up 57% in 2013, foreign investors in particular have evaporated in the country this year amid frustration with Prime Minister Shinzo Abe’s economic revival plan.

May is on pace to become the lightest trading month since the “Abenomics”-inspired rally began in late 2012, Tokyo Stock Exchange data show. This year, monthly trading values have dropped from ¥54 trillion (US$531 billion) in January to ¥41 trillion in April. By the end of trade Thursday, the figure was just ¥22 trillion so far this month.

A spokeswoman for the exchange said “we always maintain our efforts to bring attractive stocks to the attention of investors, and realize that having a good number of investors active in the market is healthy for both listed stocks and those seeking to list with TSE.”

Foreign investors have been behind most of the outflows, pulling roughly US$1.5 billion over a two-week span in May.

Tomoyuki Takahashi, a senior investment officer who oversees active stock investments at Nomura Asset Management, said investors are waiting for hard evidence of Japan’s economy improving before committing more money to the market.

“Investors have become very sensitive to risk ever since ‘Lehman shock.’ They no longer make investments based on ‘ifs.’ They come to buy only after they see some facts,” Mr. Takahashi said.

In Australia, turnover has slowed to a trickle, with computer-driven trading playing an increasingly larger role in the market. The benchmark S&P/ASX 200 is holding on in positive territory for the year, though it has retrenched from multiyear highs hit last month as concerns continue to surround China, Australia’s biggest trading partner.

A representative for the Australian Securities Exchange ASX.AU +0.33% said it doesn’t comment on trends.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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