Traders in Asia have never had more choices

September 19, 2023 06:00
Central, Hong Kong. HKEJ

With investors in some corners of Asia seeing subpar performances in the first half of 2023, some are turning to invest in technology stocks, with a particular focus on A.I.-themed investments, to generate returns and diversify risks. Asian exchanges across the region have enabled investors to easily pivot this way after introducing new investment and hedging tools to make trading more diversified, accessible and inclusive.

Asia is home to companies at the forefront of established and novel technologies that are laying the foundation for the upcoming A.I. revolution, from semiconductor enterprises to the world’s largest carmakers. Furthermore, as thematic investment becomes increasingly popular around the world, Asia is also at the helm, with investors rushing to capture trends such as sustainable investing, industrial innovation and other disruptive technologies. The supply chains of these industries lie almost entirely within this region, and so do the best hedging tools for managing risk and exposure for investors. Aligning with these trends, exchanges are collaborating to bring new semiconductor index futures to the market to empower investors to gain exposure to the semiconductor subsector.

The prevalence of export-orientated economies in Asia means an appetite for higher returns naturally extends to U.S.-focused financial products transacted in U.S. dollars. As debates about the longevity of high inflation and how key central banks will balance this against signs of economic weaknesses continue, the region’s exchanges are pushing out new products, such as new U.S. Treasury bond ETF futures in Taiwan, to help Asian investors hedge against interest rate movements without having to leave their home markets.

Asian exchanges have long had a well-earned reputation for catering to local retail investors. Some exchanges have been making risk management tools accessible to retail investors with smaller-sized derivatives, such as “mini” equity index and single stock futures, or contracts with shorter expiries.

During the pandemic, such contracts proved popular with investors who found time while staying at home to experiment with new investment ideas and easy-to-use hedging tools, further building on an already nascent trend being unleashed by faster internet connections, improved access to market data and changes in tax laws. According to a report released by the World Federation of Exchanges, the Asia-Pacific region led the rest of the world in retail trading activity, which makes up 61% of trading on average, compared to 13% in the Americas, where markets are more geared towards institutional investors.

In summary, investors of all sizes have never had more choices in Asia. The fast development of new products means investor demand will be better matched with the right assets, stimulating improved performances in the coming months and years.

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Chairman of Taifex