Asian liquidity and turnover well down in June

The sharp ups and downs of the football World Cup were reflected in stock markets globally last month, but investors seemed particularly anxious about Asia.

Despite a positive macro-level picture and stronger fundamentals than in the West, liquidity and turnover were down across major Asian markets, according to agency broker ITG. Liquidity fell by an average of 15% month-on-month and 5% compared to June 2009, and turnover saw a particularly sharp drop by 26% from May and 23% year-on-year.

In fact, several markets -- Hong Kong, Japan, Singapore and Taiwan -- hit their lowest average daily turnover in the past 12 months. That was a particularly striking swing for Japan, which posted annual turnover highs in May.

Turnover in Japan fell by 26% month-on-month to just over $15 billion, a 24% drop from June 2009, but spreads remained stable. Hong Kong posted a 26% drop from May and a 35% drop from last year to a daily average of $4.7 billion, with spreads dropping slightly to 27bp. Australia was down 29% from May to $3.5 billion, and spreads widened 4% to 24bp. Singapore fell 34% from May and 28% from June 2009 to $0.8 billion, while spreads widened 6.5% to 65bp. South Korean turnover dropped 23% from May and 8% from June 2009 to $5.5 billion, with spreads slightly narrower. Finally, Taiwan saw an 18% drop month-on-month and 34% from June 2009 to just under $3 billion, while spreads stayed almost flat.

Meanwhile, preliminary indications suggest that regional trading costs fell from the first to the second quarter of the year to a weighted average of 48 basis points, says ITG. Australia showed the largest drop, down 25%, followed by Taiwan (down 20% to 45bp), Hong Kong (down 10% to 54bp), South Korea (down 7% to 50bp) and Singapore (down 4% to 27bp).

Japan is the only market where transaction costs rose -- by a whopping 53% to 51bp -- but ITG says this figure seems high and is likely to be revised down as more client data comes in.