INDIVIDUAL INVESTORS DRIVE ASIAN STOCK BOOM: READY TO BUST?


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As the COVID War wanes, money is flooding into Asian stock markets, with young individuals pouring money into markets in their first forays into investing.
Trading volumes on exchanges in Shanghai and Shenzhen, the region’s largest, are climbing toward boom levels last seen in 2014 and 2015; volumes on Hong Kong and Seoul trading floors have set records. 
Novice investors in India, Indonesia, Taiwan, and Vietnam also are taking part in the craze.
Electronic order-book trading on the Hong Kong and Shanghai exchanges more than doubled in January, year on year, to $1.37 trillion and $517 billion, respectively; South Korea’s volume more than tripled to $709 million, according to data from the World Federation of Exchanges.
The trading frenzy has been a boon to online brokerages and exchange operators such as Hong Kong Exchanges and Clearing, share prices for which also have set a new record.
“We’ve seen armies of Asia retail investors appear and invest in sizes that are mind-boggling, both in terms of trading volume and the value of share traded,” marveled Herald van der Linde, head of Asia-Pacific equities strategy at HSBC, in a comment to the Wall Street Journal.
On 3 March, individuals made up 49 percent of trading by value on Seoul’s benchmark Kospi exchange, almost a 20-percent gain year over year. In Hong Kong, the frenzied trading pace prompted the government to raise taxes on trades by 30 percent, which could cut the value of trades by a tenth, analysts calculated.
As in the U.S., people bunkered at home with time to spare discovered trading apps; in South Korea, Instagram and Youtube personalities have enticed a new corps of day traders.
Much of the action has focused on consumer, pharmaceutical, and tech companies, seen as “momentum stocks” during the global economic shutdown.
TREND FORECAST: Once again, the markets are being artificially propped up, this time by a new generation of online gamblers. We forecast the stage is being set for another Dot-com bust, in the sense that companies whose stocks pay no dividends, and are losing money… but whose share prices keep spiking. And now, as back then, the markets are being flooded with rookie gamblers, who once they lose what they bet, won’t have any money to get back in the game.   
We are already seeing a sharp pullback in Chinese equities. Yesterday, Shanghai Composite Index fell 2.3 percent. The nation’s CSI 300 index of the 300 largest stocks fell 3.5 percent on Monday. 
Word from Beijing is that the Xi government is worried about the equity bubble being formed in both the equity and real estate sectors, and they will be cutting back on stimulus measures to curb growing debt levels. 

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