A pedestrian rides an escalator past an electronic screen and ticker board that indicates stock figures at the Singapore Exchange Ltd. headquarters in Singapore.
“Traders increase bravado to play the mean reversion trade even when things look dire,” said Stephen Innes, managing partner at Vanguard Markets Pte. “It tells me that the investors have the view that central banks will ride to the rescue and frankly, they have called it right.” “The core of this is liquidity,” said Kyle Rodda, an analyst at IG Markets Ltd. The consequence of policymakers’ attempts to stave off a slowdown is “greater financial capital washing around markets, which has flowed into riskier asset classes like equities,” he said in an email.Others have suggested the addition of more than 200 Chinese large-cap domestic stocks to MSCI Inc.’s indexes earlier this year as another reason for the increased trading volume.
While trading of the top five constituents of the MSCI Asia Pacific Index – Tencent Holdings, Alibaba Group, TSMC, Samsung Electronics and Toyota Motor – has remained relatively stable for the last five years, the additional volume may have come from the “bottom tiers, boosted by index shuffling such as MSCI’s,” said Margaret Yang, strategist at CMC Markets Singapore.