By Frances Yoon
Stock trading has surged across Asia, as markets have recovered
from the shock of the Covid-19 pandemic, with many younger
individual investors piling into shares for the first time.
Activity on the region's two busiest stock markets, in Shanghai
and Shenzhen, has risen toward levels last registered in China's
2014 and 2015 boom. Trading on exchanges in Seoul and Hong Kong has
broken records. Shares are also changing hands in huge numbers in
Taiwan, India and some smaller markets like Indonesia and
Vietnam.
The upswell has been a gift for exchange operators like Hong
Kong Exchanges and Clearing Ltd., whose shares recently hit a
record, and for online brokers offering Robinhood Markets
Inc.-style services.
Futu Holdings Ltd., an online broker backed by Tencent Holdings
Ltd. whose shares trade in the U.S., has rocketed to a $19.5
billion market capitalization as of Wednesday--nearly 12 times what
it was worth a year earlier. Shenzhen-listed East Money Information
Co. has more than doubled over the same period to claim a $42.4
billion valuation.
"We've seen armies of Asia retail investors appear and invest in
sizes that are mind-boggling, both in terms of trading volumes and
the value of shares traded," said Herald van der Linde, head of
Asia-Pacific equity strategy at HSBC.
In South Korea, individual investors have been net buyers of
stocks in record quantities. On Wednesday, individuals made up 49%
percent of all stock trading by value on the country's main board,
the Kospi, up from 40.4% a year earlier, according to figures from
the exchange.
In Hong Kong, the frenzy prompted the government to say it will
lift taxes on share-trading by 30%--a move Citigroup analysts say
could cut trading values by a 10th. Outlining the plan in his
budget, Financial Secretary Paul Chan also said "hectic trading in
the stock market" meant Hong Kong was likely to beat its earlier
estimate for stamp-duty revenues for this fiscal year.
Like in the U.S., investing apps have attracted individual
traders with time on their hands thanks to the pandemic. Social
media is also fueling interest: in South Korea, for example,
influencers on YouTube and Instagram have helped inspire a new wave
of day traders.
"Retail investors saw the flash crash last year as a terrific
opportunity to enter the market," said Angus Richardson, co-head of
pan-Asian execution services at Citigroup. "People being at home
has also increased interest in equities," he said.
Mr. Richardson said the trading surge had made stocks more
volatile intraday--and might lift some valuations ahead of fair
value--but hasn't fundamentally changed how institutions viewed
investing in Asia.
Like in the U.S., individual investors in Asia have been riding
market momentum and buying technology, consumer and pharmaceutical
stocks, said Robert Levine, co-head of trading and execution
services at CLSA.
The value of stock trades matched on exchanges, in what is known
as electronic order-book trading, gives a sense of the trend. Such
trading on the Shanghai and Hong Kong exchanges more than doubled
in January from a year earlier, to $1.37 trillion and $517 billion
respectively, World Federation of Exchanges data shows. In South
Korea, it more than tripled to $709 billion.
For comparison, similar trading for Nasdaq Inc. in the U.S.
stood at $2.2 trillion, up 54% from a year earlier, while for
Germany's Deutsche Boerse AG and the London Stock Exchange Group
PLC the equivalent figures were $178 billion and $148 billion.
Electronic order-book statistics don't capture some important
kinds of trading, like negotiated deals where buyers and sellers
agree on big block trades. In the U.S. and Europe, but not in Asia,
a sizable chunk of activity also occurs on so-called multilateral
trading facilities, rather than on traditional exchanges.
The trading surge is spurred partly by the trillions of dollars
that central banks have injected into the global financial system,
investors and bankers say. Different dynamics are also at play in
particular markets, too.
For example, in Hong Kong, a wave of mainland Chinese money has
rushed into the market through a trading link known as the Stock
Connect, in search of cheaper shares or companies whose equities
don't trade in Shanghai or Shenzhen.
Some households could be moving away from traditional investment
strategies, like buying gold in India or focusing on property in
China, said Frank Benzimra, head of Asia equity strategy at Société
Générale.
"People are realizing that equities can also become a way to
build wealth, and that's driving the beginning of this so-called
'equity culture' in this part of the world," he said.
To be sure, the increase in trading volumes and retail
participation has yet to be tested by a major drawdown. Activity
often surges in bull markets and wanes in a downturn. Many
benchmark indexes in the region have hit record or multiyear highs
recently.
John Tsai, head of core equities for Eastspring Investments,
said online platforms have made it efficient and cheap to invest in
stocks--something that wouldn't change even if share markets
weakened. But he said in a pullback, Asian authorities were capable
of imposing restrictions to discourage people from betting on the
stock market.
More broadly, he added: "I wonder if these people understand the
risks...They might not be thinking of risk and diversification,
especially when markets have gone up 40% in the past year."
Quentin Webb contributed to this article.
Write to Frances Yoon at frances.yoon@wsj.com
(END) Dow Jones Newswires
March 04, 2021 05:44 ET (10:44 GMT)
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