No, not the latest circus extravaganza to hit Las Vegas, but rather a snapshot of the events this past week in Asian markets. After a gut-wrenching four days of trading that saw Japan’s stockmarket plough into bear market territory by Thursday, and exchanges across the region nosediving, Friday opened brightly with green across the boards in all markets.. Markets in Hong Kong, China and the Philippines joined the Japanese in a broad-based recovery Friday, although not enough to claw back the hefty drop yesterday.
Japan’s Nikkei plummeted 6.4% on Thursday, closing a full 20% down – and hence into a bear market – from highs in late May. In early trading, it was up over 2%, pointing the way for other markets to feel more cheery. Thus far, the Philippines is showing the best recovery at 3.5%, after the PSEi plunged 6.8% on Thursday, its worst showing since October 2008. In Australia, an early rally was led by bank stocks.
As fastFT reports, better sentiment this morning was driven by the sense that reaction to the US Federal Reserve paring back its stimulative bond buying has been overdone. This was reinforced by a Wall Street Journal article wherein the Fed suggests any tapering of the quantitative easing policy would be gradual.
“But Asian markets are still combating uncertainty at the Bank of Japan and reacting to the continued slowdown in China. The equity decline have have been halted, temporarily, but this is hardly a recovery,” fastFT says.
While banks always point to the opportunity in volatility, one unhappy consequence of the market upheavals in the past week could be the suspension of US$10 billion’s worth of planned IPOs in Asia, which will dent advisory fee income.Companies are gauging demand or taking orders for as much as US$2.5 billion of IPOs in South East Asia and US$2.3 billion of deals in Hong Kong, according to data compiled by Bloomberg. Suntory wants to raise as much as US$4.7 billion this month in Japan’s largest first-time share sale since September.
But some companies marketing IPOs may be forced to accept lower valuations or delay listings. Hopewell Hong Kong Properties scrapped a US$780 million offering yesterday while China Harmony Auto Holding plunged 16% in the worst Hong Kong debut since February 2012.
In more encouraging news, private banks in Asia may start seeing the fruits of their hefty investments in the region, with new research pointing to a 50% growth in the market in 2014. Only 10% of Asia’s rich currently use a private bank, but East & Partners says that next year 15% will do so. Wealth managers have to absorb steep costs to target this segment – the recent Wealth Management Summit in Singapore pointed to a cost-to-income ratio of 80% to serve these customers.
Michael Paulus has been poached from HSBC into a newly created role to head up public sector coverage of national government, central banks and sovereign wealth funds across the region.
According to the latest Hotels.com Club Sandwich Index, the Singapore version is rising in cost, up from its 21st position in 2012. But they are still cheaper than Hong Kong, which moved into 10th position from 11 last year. Business travellers should pack their own or motivate an increase in their daily stipend for trips to Hong Kong – the basic ‘Club’ ranges from HKD237 (just over US$30) in one five-star hotel to a more reasonable HKD86 (about US$11) in a three-star establishment.