A bunch of Asian indexes has had a disappointing year, at least its first half. Japan’s 225-issue Nikkei Stock Average lost more than 10 percent in the first five months of 2014, according to FactSet, as investor confidence in the new economic program known as Abenomics ebbed away.
Abenomics is a suite of measures aimed at reviving Japan’s sluggish economy with three so-called arrows: a massive fiscal stimulus, more aggressive monetary easing from the Bank of Japan, and structural reforms to boost Japan’s competitiveness. The policy was introduced by Japanese Prime minister Shinzo Abe after his December 2012 election.
In most recent news, in April-to-June period the world's third largest economy suffered its sharpest quarterly contraction since 2011. The 1.8-percent contraction raised even more questions about the government's economic policy.
Hong Kong’s Hang Seng Index had a rather disappointing start of the year as it lost 5% in the first three months, while China’s benchmark Shanghai Composite Index lost almost 4 percent in the same period of time. In recent weeks, though, the two bourses have been showing gains: in August the Shanghai Index rose 12 percent from this year’s low as monetary easing, accelerated government spending and gains in manufacturing spurred speculation the nation will meet its 7.5 percent economic expansion target. Also, optimism that cross-border trading between Hong Kong and Shanghai will spur inflows has boosted equities.
The Asian funds have also been suffering outflows, which even dragged EM inflows down. According to Renaissance Capital’s figures, over the last week, Asian, excluding Japan, funds saw outflows of 0.2 percent, on the back of redemptions from Chinese and Taiwanese exchange-traded funds. Gennadiy Babenko, equity research analyst at Renaissance Capital in Moscow, told Radio VR that though the situation with Asian funds is not as good as with diversified funds, it’s still better than in some other emerging markets.
“If you look at fund flows and compare, for example, Asia versus other EM regions, say, near Latin America, Asia is feeling not as bad. The total outflow from Asia is around $2 bln, while EMEA lost $3.3 bln and around $8 bln for Latin America,” Gennadiy Babenko said.
Everything is relative, depending on what’s your benchmark. While in the beginning of the year market watchers saw considerable outflows from Asia, now they’re seeing some new money coming to the region.
