Signs of Froth Emerge in Asia as Investor Excess Goes Global

A man looks at an electronic stock board outside a securities firm in Tokyo.
A man looks at an electronic stock board outside a securities firm in Tokyo.

(Bloomberg) -- Asia’s financial markets are showing signs of froth as investment pours into nations that have so far contained the coronavirus better than their Western counterparts.

South Korea’s Kospi stock index is among the best performers worldwide in 2021, China’s equity benchmark is near a record and Japan’s Nikkei 225 index has scaled a new peak in dollar terms. An Asian currency gauge is on one of its longest winning streaks in more than two decades.

“The market is excited about vaccine development and distribution, pretty much riding on the momentum since the end of last year,” said Tai Hui, chief Asia market strategist at JPMorgan Asset Management. “Investors are trying to find markets that still offer value, or have lagged behind.”

Here’s a closer look at some of the optimism in Asian assets:

Seoul Train

In March the Kospi index suffered its biggest one-day drop since October 2008 and closed at the lowest level since 2009. From there, South Korean equities went on a rebound rally and have more than doubled, culminating with a record high this month.

Tokyo Top

The Nikkei 225 reached a record in U.S. dollar terms this week, aided by a strengthening in the yen. Japan’s stocks have climbed even as the nation expanded a virus-related state of emergency to cover 60% of the economy.

Beating Bitcoin

The cold weather in Asia has triggered some spectacular asset moves that have eclipsed Bitcoin in the case of Japan power futures. Power contracts have surged 13-fold since the beginning of December, while the cryptocurrency has gained around 97% over the same period.

Margin Mania

A surge in the total balance of margin transactions has helped to boost Chinese equities in recent weeks. The balance, running at the highest level since 2015, is closely associated with the rise of the ChiNext and other mainland indexes.

Tech Frenzy

The Bursa Malaysia Technology Index has risen more than three times in value from the depths seen in March 2020, handily beating Malaysia’s main stocks index. The nation this week imposed the first nationwide emergency since 1969, a step that gives the government more power to tackle a surge in Covid-19 cases.

Currency Climb

Asian currencies are on course to appreciate for an eighth straight month against the U.S. dollar, the longest streak for more than two decades. The Bloomberg JPMorgan Asia Dollar Index, which tracks 10 regional currencies, remains in a bullish uptrend as cash flows into the region.

Dumbfounding Stock

Finally, shares in electronic-parts maker Delta Electronics (Thailand) Pcl have jumped more than 1,000% over a year. That’s left market watchers -- and even the company -- puzzled, and generated a warning from the local stock exchange about volatility.