Asian Stocks Traders Have Never Been This Busy in Summer

(Bloomberg) -- Investors are having the busiest-ever summer in Asian stock trading, partially helped by stuck-at-home retail traders.

Trading activity remains elevated in August, with weekly volumes hovering close to 200 billion shares. This came after more than 300 billion shares on the MSCI Asia Pacific Index changed hands during the week ended July 10, which smashed a record set during the initial coronavirus hit to global financial markets in February.

Stock trading is usually more subdued during Asia’s summer as traders take holiday. In the decade through 2019, average weekly volume in July and August for regional benchmark-member stocks was 49.1 billion shares, lower than the full-year weekly average of 50.4 billion shares, according to calculations by Bloomberg.

With a lack of news flow driving investors, the level of trading volume is “very unusual for this time of the year, led by retail participation,” according to a note from JPMorgan Chase & Co. written by strategists including Mixo Das.

“One of the investment outcomes is to be long exchanges and brokers,” Das wrote in emailed comments. “Also, heavier retail markets should see poorer performance of long-term momentum strategies as retail investors are typically faster to take profit.”

Surging market activity by individuals has been a phenomenon everywhere, thanks to low transaction fees and the now ubiquitous trading apps offered by brokerage firms. The amateur investor craze has led to some of the strongest rallies in Asia, with a Malaysian-based medical glove maker up 1,100% this year, helping boost the trading volume in the nation’s stocks to a record.

Since the end of June, Asia’s regional stock gauge has managed to gain 8.3% as investors shrugged off a resurgence in coronavirus infections and heightened U.S.-China tensions. Coordinated global stimulus by central banks and governments has fueled recovery hopes and boosted the stock market.

“I’m amazed,” said Axicorp Ltd’s strategist Stephen Innes, who attributes the spike in volumes to a combination of increased individual investor involvement and the one-way proclivities of technology stocks. “The plunging risk-free rates around the world partially explain this phenomenon as equity risk premiums have dropped. People don’t care if spot valuations look too high.”

Still, trading will become “more challenging” if there’s a rotation into riskier laggards, Innes said.

The hunt for laggards has already gathered pace. MSCI indexes for industrials and consumer discretionary shares gained 7.5% and 6.1% respectively in August, beating previous leaders including infotech and communication services.

©2020 Bloomberg L.P.