Strong market performance in Hong Kong and Japan throughout 2013 may cancel out concerns that a tapering of US quantitative easing will add unwanted volatility to the region.
What is the outlook for Asian equities trading in 2014?
Asia’s equity markets are expected to steadily grow in 2014, but key markets including Hong Kong and Japan may not meet the substantial growth rates witnessed in 2013. Hong Kong in particular showed markedly improved activity throughout 2013. Although the Hang Seng index finished the year with just a 3% increase at 23,306 points, average daily turnover in 2013 was HK$62,560 million – a 16% increase on 2012’s HK$53,850 million.
Similarly, Japan’s equities market saw a bump over 2012 figures, which it is expected to sustain into 2014. The Japan Exchange Group – an amalgam of the Tokyo and Osaka bourses following a recent merger – reached a historic high of 841.6 billion shares traded on its First Section. Trading value within that section reached its third highest level of JPY639.9 trillion, making 2013 a record year, only behind 2007 and 2006.
In Singapore, the end of 2013 saw a slightly depressed market compared to Japan and Hong Kong – the value of securities trading during November in particular saw a 30% slide on the same month a year prior as the market failed to recover from a mid-year slump.
What impact will ETF growth have in 2014?
One major factor behind strong market performance in Asia has been the growth of exchange-traded funds (ETFs), which is expected to continue. In Hong Kong, daily ETF turnover in 2013 reached HK$3,701 million – a 75% increase over 2012’s HK$2,114 million. For Japan, domestic ETFs in 2013 also set an all-time high with turnover at 4.35 billion units valued at JPY16.2 trillion contributing to a daily average of 17.78 million units traded with a value average of JPY66.2 billion.
As in other regions, take up of ETF products will continue into 2014 and spread throughout the region’s less-developed equity markets.
What market structure trends will impact Asian trading volumes in 2014?
The impact of the US Federal Reserve deciding to scale back its quantitative easing caused concern across Asian markets as it did in the US and European equity markets. Despite the Fed beginning to do this, Asian equities will likely not be subject to the volatility experienced in 2013 as markets are thought to have already adjusted to life without central bank support.
For Hong Kong, the incumbent exchange chief has continued to state the exchange will target Chinese companies to further solidify its position as a gateway to China. If Hong Kong can develop a steady flow of Chinese IPOs it will have a limited impact on overall market performance, but further strengthen Hong Kong as an Asian hub in the face of growing activity on domestic Chinese exchanges.