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Asian intermediation shifts from stocks into bonds and bank deposits for most countries
Asian stock markets attracted less investible funds in 2018 and more went into bond markets, banking institutions and managed funds

March 18, 2019 | Wendy Weng

This year’s Asian financial intermediation trend report has shown a slight displacement of stock markets in favour of bond markets, banking institutions and managed funds as destinations for investible fund flows, on the back of mounting nervousness over the impact of the ongoing US-China trade tension and rising interest rates on economic growth in the region. 

Stock markets

All the nine Asian economies covered in the report experienced a decline in their stock market contribution to total investible fund in 2018, and their stock market capitalisation also shrank significantly. In these markets, about $3.8 trillion in market capitalisation was wiped out in 2018. The escalating US-China trade war led to concerns over economic downturn and pulled down Asia’s major stock indexes, and the stock markets were also significantly affected by rising US interest rates. The MSCI AC Asia ex Japan Index slumped 16.4%, the worst since 2011. The benchmark Shanghai Composite Index was the worst performing equity market in the region in 2018, and the index tumbled 24.6%, its sharpest drop since 2008. South Korea’s KOSPI Index plunged 17.3%, and Hong Kong’s Hang Seng Index lost 14.8%.

Among these markets, Hong Kong saw the most significant decrease in its stock market contribution to total investible fund in 2018, while the stock market capitalisation in China and South Korea registered the largest fall. The share of stock markets in total investible funds in Hong Kong declined from 54% in 2017 to 48%, and stock market capitalisation fell by 12% to $3.8 trillion. In China, the combined market capitalisation of Shanghai Stock Exchange and Shenzhen Stock Exchange dropped by 23% to $6.3 trillion. This was largely triggered by China›s slowing economy, the trade war with the US, the depreciation of renminbi and worries over Chinese corporate earnings.

Bond markets

Bond market contribution to total in...

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Keywords: Stock Market, Capitalisation, Economic Growth