Trading in Asian markets went into the doldrums during the summer months, a time when traders usually depart the sub-tropics for temperate vacations.
In August 2013, the average daily trading value of Tokyo Stock Exchange 1st Section stocks was JPY 1.9657 trillion. In July 2013, the average daily trading value of 1st Section domestic stocks was JPY 2.2623 trillion.
Last month was the first time average daily turnover fell below JPY 2 trillion since February 2013, though, putting that into context, it is still approximately twice the average daily level of 2012.
Following the lull in August, activity in September will provide a barometer of whether trading will pick up for the rest of this year. If it fails to do so, the rest of 2013 may disappoint.
“There is a traditional perception that the summer months in Asia are quieter. We have seen years when a summer lull can continue to the end of the year,” says Ofir Gefen, director and head of research and algorithm consulting in Asia at ITG in Hong Kong. “July and August volumes were lower but not disappointing. There was a pick up at the end of the month. I’m still optimistic. September will be an interesting month, to see if activity picks up it will be a positive sign. If it quietens down it will be worrying for Asia.”
Turnover in Japanese markets hit a peak in May 2013 at levels that were double the volumes in July and August.Beyond Japan, south Asian markets were buffeted by volatility a fortnight ago, and that may foreshadow events for the rest of the year.
“The market is absorbing the expectation of Federal Reserve lowering its easy money policy. Everyone is expecting it, but is not sure when it will happen,” says Gefen. “The brunt is being borne by emerging markets.”
The turbulence at the end of August was felt most strongly in Asia’s southern and south eastern markets. There may be a contagion effect, spilling over into the more actively traded northern Asia markets, given that there has been news from Indonesia and Thailand about economic slowdown and inflation.
Regional currencies have been under pressure as well. The Indonesian rupiah fell abruptly by 10%. In India there was similar bad news about inflation and investors swiftly pulled their money out.
Indonesian palm oil and natural resources are exported to Chinese businesses and consumption falls within China have a negative effect on the smaller regional markets.
“The news coming out of China is not all bad, but causing some concern,” says Gefen. “China’s gross domestic product slowdown has a dragging effect on other economies, such as Indonesia and Thailand.”