Asian investors, wary that the region’s stock markets and currencies have run up too far too fast and wondering whether it is time to take some money off the table, are finding that their concerns are not being reflected in major gauges of volatility and fear.
These indicators are supposed to signal red, or at least orange, when stocks are overvalued and risks – whether economic, corporate or political - are building. Currently, they all suggest it is still safe to be invested in riskier assets.
And that is despite the threat of some kind of conflict involving North Korea, or trade tensions between the U.S. and China boiling over, let alone the lingering threat of a China debt crisis.
The Asian indicators are a reflection in Asian hours of the world’s best-known fear gauge, the VIX .VIX, a measure of U.S. stock market volatility, which recently hit an all-time low.
They include the volatility gauge for Chinese stocks .SSEC .VXFXI, which has been at 18 percent for much of the year, the lowest since 2014.
Likewise, when the Federal Reserve caused the so-called taper tantrum when it looked like it was going to withdraw stimulus from the global economy in 2013, Asian currencies took a hit. The implied volatility for the rupiah spiked to 18 percent several weeks before the rupiah tumbled.
It is all enough to make some investors wonder whether they are being overly nervous.
The U.S. dollar .DXY is down 9 percent this year, pressured by a host of factors including disappointing U.S. growth and mounting obstacles to Trump's ambitious agenda to reform U.S. healthcare and tax policies.
That is giving investors a fresh reason to pursue Asian stock and bond investments, in the hope of further currency gains. Dollar-based returns so far this year in Indian, Chinese and South Korean stocks are already around 30 percent.
Reference: Reuters
Read More: http://www.reuters.com/
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