Retail frenzy lifts three of Asia’s top-performing stock markets

Bloomberg

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.
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.
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 US, 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 and restaurants.
But then retail trading isn’t the only force driving these better-performing markets in Asia.
Vietnam, Korea and Taiwan 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 US 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. 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.
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.
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.