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Brief look at performance of Asian stock markets

 

Stock markets play an important role in corporate financing in Asia. But inspite of seeing an increase in importance in terms of size and investment activities from neighbouring countries, the region’s markets are less reliant on economic and corporate fundamentals.

Using a model that is based on international pricing of assets and economic theory, in addition to accounting literature, we find evidence of higher instances of idiosyncratic influences in the pricing of Asia’s stock markets, compared to their G-7 counterparts.

There is a significant relationship between the strength of implementation of securities regulations and the “noise” in stock pricing, which suggests that improvements in the regulation of securities markets in Asia would enhance the role of stock markets as a stable and reliable source of financing in the coming future.

This article takes a look into the present scenario of the various stock markets in Asia.

The Asian stock market is steel reeling under the lasting impacts of two of the major events occurring towards the end of last year, namely Brexit where the United Kingdom voted themselves out of the European Union and Donald Trump’s successful Presidential campaign. The Asian stock markets didn’t have the best run in the previous year as they returned some poor financial results. The return of investment was a discouraging increase of 3 percentage points with an increase of 10% in the S&P 500 division. Hong Kong based Hang Seng Index did not see any major changes over the last year and found itself in pretty much the same position as in the beginning of 2016 with results slightly in the red.

Mainland China reported numbers that were gloomy at best. The Shanghai stock market plunged 13 percentage points in terms of local currency, with the market feeling the aftershocks of a harsh sell-off immediately after the new year of 2016. There were a few exceptions though: The China State Construction company grew 45% year on year as China is expected to keep pumping in investments in the infrastructure sector. On the other hand, Chinese liquor giant Kweichow Moutai rose 50% in terms of returns and is touted to be the leader of the Chinese Microbrewery industry in the coming months.

Further East, Japan’s stock market index TOPIX (Tokyo Stock Price Index) was back to square one as the growth experienced in the first half of the year was quickly hampered in the last quarter as a result of Donald Trump’s election as U.S president thus nullifying the positive growth experienced up-to July 2016. The biggest benefactor in Japan was clearly Nintendo, whose runaway success with the popular video game Pokemon Go followed by the smartphone version of the Super Mario franchise saw it making giant strides in the gaming division.

Meanwhile, the South Korean trading market saw a growth of 5% despite the country being plagued by political issues like the impeachment of President Park Geun-hye who was embroiled in a scandal.

Souring relationships with China also did not do South Korea any good and it came as a surprise to investors that this market actually managed to post positive results.

Neighbouring country Taiwan saw a 10% appreciation in the technology sector with tech companies like HTC posting profits along with smartphone lens maker Largen producing a 65% surge in revenue. On the other hand, Catcher Technology, a metal casing company dived 20% due to increased competition. Meanwhile, Singapore had a lot to ponder over especially in the shipping industry with Sembcorp Marine down 20% and Yangzijiang Shipbuilding tanking 20% with the biggest irony being the fact that the best blue-chips company in this market wasn’t even based in Singapore.

Speaking of the subcontinent, India posted some positive results and is touted to be the next growth machine of Asia following China. This growth can largely be attributed to the economic schemes and policies being undertaken by the NDA government under the leadership of Prime Minister Narendra Modi.

On the other hand, the Indian markets did take a hit primarily due to unprecedented scale of implementation of demonetisation which phased out 80% of India’s bank notes which is going to impact customer spending till the last quarter of 2017. The big gainer of the year was Tata Steel posting 50% growth in revenue while IT majors like Infosys and Wipro would be expecting a downturn following Donald Trump’s ascent to the president post who has been very keen to bring reforms on issuing H-1B visas to IT companies.

 

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