Asian correction natural: Daiwa Institute

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Asian markets are trading in the red today with Japan's Nikkei falling 0.70%, or 127.50 points, at 18,112.80. Hong Kong's Hang Seng plunged 0.67%, or 146.88 points, at 21,807.79.

South Korea's Seoul Composite declined 1.46%, or 26.2 points, at 1,768.04 while Singapore's Straits Times slipped 0.66%, or 24.19 points, at 3,615.30. However, the Taiwan Weighted was up 0.14%, or 12.63 points, at 8,864.62.

Hirokazu Yuihama , Asian Regional Strategist, Daiwa Institute of Research , feels the correction in Asian markets is natural and it's providing buying opportunities. On why the Asian markets are trading in the red despite good global cues, he said, "We have seen some profit taking for example in Korea because of the sharp run-up so far. I think it is a natural correction and it is providing buying opportunities."

 

Speaking on the volatility surrounding Shanghai since the beginning of today's trading session, Yuihama said, "In terms of valuations, looking at the price lines ratio, it is 50 times, which is higher than other regional markets. This closed-stock market has different characteristics than other markets. I think the individual investors in the Chinese mainland and markets there have a national investment decision because the deposit rate is still too low, when we take into consideration the CPA numbers."

 

On what other factors were playing truant for Asian markets besides higher bond yields , he said, "Higher bond yields are not necessarily driving the other markets. It is also showing that higher bond yield means that investors start to think about the world economic rebound. I think it is especially good for the Korean and Taiwan markets, which are very economically sensitive markets. For rate sensitive markets like Hong Kong and Singapore, the higher interest rate is not positive. The other possible risk, around the Asian region, is the reversal of the yen carry-trade. May be it depends on the monetary policy of the Bank of Japan later this year."