For those trading Asian stocks the New Year looks like markets will be volatile. China is attempting to adjust its largely state run economy downward to a soft landing, with middling success. Japan has succeeded in increasing exports on the back of a weaker Yen. Thailand is in the grip of social unrest. And the game console maker, Nintendo, admitted to losing money in 2013! Asian stocks fell across the board recently as Chinese factory output dropped in the fourth quarter of 2013.
Why Are You Trading Asian Stocks?
The rationale for trading Asian stocks over the years has been that Asia has been the center of global economic growth. Traders betting on gains have commonly been rewarded. Large Asian companies trade as American Depository Receipts. As such traders can apply technical analysis of the American versions of these stocks. After the market crash of 2008 Asia, specifically China, was leading the way out of the recession. But it appears that all is not well in the state controlled economy of mainland China. Construction of frequently vacant buildings continues. The leading lender in China, Industrial & Commercial Bank of China Ltd., saw its shares fall by two percent in Hong Kong recently. Industrial production is down. Attempts to stimulate consumer spending to support continued Chinese growth have been a failure. And, as economic growth in China slows so does trade with its immediate neighbors. Trading Asian stocks in the next year, or even longer, may be a matter of shorting these equities as prices fall! The exception, perhaps, will be Japan.
Thailand is in the news as protesters attempt to unseat the elected government. Russia is concerned about terrorist attacks at the Sochi Winter Olympic Games. And China continues to balance a heavy hand in governing with promises of economic success while a real estate bubble still threatens. Social unrest too often leads to economic chaos. To the extent that things truly fall apart across the Pacific, traders will be wise to hedge their risk by trading options or trading futures options on Asian stock ADRs.
What to Trade when Trading Asian Stocks
There are a lot of Asian stocks that trade as ADRs in the USA. You can easily pick stocks from the following countries:
- South Korea
- The Philippines
- New Zealand
- China/Hong Kong
Solid examples for trading Asian stocks via ADRs in this group include Taiwan Semiconductor, SK Telecom, Chartered Semiconductor, Philippine Long Distance Co, New Zealand Telecom, Indonesia Satellite Corp, Toyota, Cable and Wireless Hong Kong, and National Australia Bank.
Indexes to follow for these nations:
|Australia||All Ordinaries Index|
|Hong Kong||Hang Seng Index|
|Japan||Nikkei 225 Index|
|New Zealand||ZNSE 40 Index|
|Singapore||Straits Times Index|
|South Korea||Seoul Composite|
|Taiwan||Taiwan Weighted Average|
Strategies for Trading Asian Stocks
Unless you have special insight into Asian companies and economies we suggest that you avoid trying to analyze fundamentals. In many cases there is not enough transparency to make secure judgments. However, stocks that trade as ADRs on US exchanges are amenable to profitable day trading strategies the same as US based stocks in these markets.