Retail Frenzy Lifts Three of Asia’s Top-Performing Stock Markets

Three of Asia’s best-performing stock markets this year are also ones where individual investors are playing out-sized roles, underscoring the growing influence of retail traders around the world.

Nowhere is this more apparent than in Vietnam, where individuals account for about 90% of turnover and the VN Index has surged 20% in 2021, the most among major benchmarks in the region. Not far behind are tech powerhouses South Korea and Taiwan, where equity indexes have gained more than 10%. Retail traders are responsible for about 75% of transactions in Korea and around 70% of the turnover in Taiwan.

The rallies have come even as foreign investors are net sellers in all three markets this year.

Retail Frenzy Lifts Three of Asia’s Top-Performing Stock Markets

The global retail-investing boom that’s taken hold during the pandemic is continuing amid new outbreaks of the virus in Asia this year, with fresh curbs on movement forcing more people into the market to supplement lost income or make up for the meager interest they can get on savings from bank accounts. The proliferation of cheap trading apps on smart-phones and mobile devices remains a key catalyst for the trend.

“Retail traders will continue to be an important market force as they pick up knowledge and skills in trading and investing,” said Margaret Yang, a strategist at DailyFX in Singapore. They may also bring bouts of “higher market volatility due to ‘herd effect,’” she warned.

That’s somewhat evident from the recent market activity in Taiwan, where a flareup in virus cases saw the benchmark index plunge earlier this month to cap its worst weekly drop since March 2020, only to reverse most of those losses over the next two weeks.

Meanwhile in the U.S., where the S&P 500 Index is hovering near a record, some individual investors appear to have decided to turn off their trading apps and put their money in relatively less risky assets as the vaccine rollout allows the re-opening of offices, restaurants and bars.

Not Just Them

But then retail trading isn’t the only force driving these better-performing markets in Asia.

Vietnam, Korea and Taiwan have also benefited from the export outlooks for their economies as global vaccine rollouts buoy confidence around the world.

Shipments from Korea jumped 53.3% in the first 20 days of this month from a year earlier. Taiwan’s exports beat estimates in April amid rising sales of semiconductors and other electronic components. Vietnam, which is also battling a nationwide virus outbreak, is seen benefiting the most in Asia from a rebound in the U.S. economy on the back of massive stimulus.

Some analysts caution that retail traders may not be able to maintain the frenetic pace of recent months.

“The volumes were running three, four, five or even -- the case in Taiwan it was six times -- the trading volumes we saw in 2016,” said Jonathan Garner, Morgan Stanley’s chief Asia emerging market strategist in Hong Kong. “When you have that degree of volume increase, it’s unlikely to be sustainable.”

Vietnam

In Vietnam, local investors have stepped up as overseas investors trimmed their holdings this year.

Limited investment choices for individuals, relatively low interest rates and growth in local broking services have been cited as reasons for the moves.

“We expect high levels of activity to be sustained as long as bank deposit rates stay on a downtrend,” said Stephen McKeever, head of the institutional client division at Ho Chi Minh City Securities Corp.

Retail Frenzy Lifts Three of Asia’s Top-Performing Stock Markets

Quynh Cao, director of institutional sales at SSI Securities Corp., said she’s on alert for a potential market correction and is closely watching for any new and serious spreading of the coronavirus.

Taiwan

Taiwan has seen increased participation from individual traders since regulators opened odd-lot share trading in October last year, which made high-priced stocks like Taiwan Semiconductor Manufacturing Co. more investable for individuals, especially the younger generations, according to Patrick Chen, head of Taiwan research at CLSA.

While foreign investors have sold Taiwanese stocks in May, average daily turnover stands at $17.9 billion, more than 30% above the daily average this year, according to data compiled by Bloomberg.

Another boost could be on the way, with the Taiwan Stock Exchange and Taipei Exchange planning to ease work-from-home rules for stock and bond trading to facilitate market activity, according to people familiar with the matter.

READ: Taiwan Is Said to Ease WFH Rules for Stock, Bond Trading

Retail Frenzy Lifts Three of Asia’s Top-Performing Stock Markets

South Korea

Retail traders in Korea have been heavy buyers of tech and bio-tech stocks. Despite the recent lifting of a short-selling ban, and multiple days of net selling by individual investors over the past week, some expect them to remain influential.

Any softness in sentiment now is likely to be “temporary” and retail traders will probably keep adding to their holdings of large-cap exporters such as Samsung Electronics Co. and Hyundai Motor Co., said Kiwoom Securities Co. analyst Han Jiyoung.

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.