While Asian equity markets are teetering at their two-month highs, data compiled by World Federation of Exchanges (WFE) point to a possible reversal of trend. The share turnover velocity (STV) of top exchanges of the Asia-Pacific region has been dropping consistently after a peak in May and June 2009. STV is an indicator of the breadth and liquidity in the market and is calculated as a ratio of traded turnover to market capitalisation. Globally, institutional investors are attracted towards those markets with high share turnover velocity, as it means lower impact costs. And any fall in these numbers doesn?t augur well for the future of the market. ?The declining STV across the exchanges is technically not positive and suggests some caution going forward? said Marc Faber, global investment guru and editor of Gloom Boom and Doom report, in a response to an email. He adds that it also indicates that individuals are not participating much in the rally.
?It has often meant a correction is coming,? said Jim Rogers, legendary investor and chairman of Singapore-based Rogers Holdings in an email reply.
STV of the National Stock Exchange (NSE) fell to 51% in February 2010 against 70% in January. During the same period, Bombay Stock Exchange (BSE) figures fell from 23.7% to 16.8%. These figures were as high as 130.5% and 40.2% on NSE and BSE.