Asiamoney.com

Is this the top? Investment bankers who’ve been around a while say that when you see a flood of block trades from big shareholders cashing out of the stock market, it’s time to head for the exits. And you have to say, the block trades have been piling up for months now.

It started with a slew of big deals out of China in September. First, TPG, the private equity group, sold down $1.2 billion worth of shares in Ping An. One week later, Vodafone sold its entire stake in China Mobile, raising US$6.5 billion in the largest ever overnight equity offering from Asia. And then Goldman Sachs sold down US$2.25 billion of its stake in ICBC. Between them they raised a shade under US$10 billion in a month.

But in the background of the Chinese mega-deals, dozens of companies have been selling out of peripheral holdings, or shareholders shifting positions in their companies. Key shareholders in Hynix, Zhongsheng Group and China National Building Materials have sold out or sold down. Smart institutions have sold out of non-core or investment businesses: Ping An from Longfer Properties, Banpu Minerals from Indo Tambangraya Megah, Singaporean sovereign wealth fund GIC from Ruinian, and Golden Concord Asia from Overseas Union Enterprise, while Bumi Resources sold a chunk of itself to Credit Suisse. There have been secondaries from Xingda, PCCW, Intime, Hengdeli, Chaoda Modern Agriculture, China Mengniu, China Resources Gas and China High Speed Transmission, to name but a few. In one week in October blocks and sell-downs went through at Khazanah, Lippo Karawaci, International Mining Machinery, SM Prime and BEC World.

Then, a pause: this was when the jumbo listings of AIA, Coal India and the rest went through, which sucked up liquidity and diverted attention from all the blocks. But with those heavyweights gone, the selldowns are more vibrant than ever.

This last week or so has perhaps been the busiest yet, with shareholders cashing out of almost US$2 billion all over the region. Tsum Sha Tsui Properties sold down US$663 million of Sino Land stock; Indopark Holdings and Merrill Lynch Asia Real Estate Opportunity Fund sold HK$1.36 billion of stock in Evergrande Real Estate; the CEO and chief operating officer of SJM Holdings, the casino group, cashed out stock to the tune of HK$791 million; One Equity Partners sold US$632 million of OCI stock in South Korea; Indika Mitra Energy in Indonesia raised US$215 million from a sale of Indika Energy shares; and Khazanah was active again, selling 66 million shares in Malaysia Airport for the equivalent of US$128 million, according to IFR Asia.

But, while it appears to be a clear warning sign when people start cashing out, there is also an opposite force at work. Talk at the G20 was dominated by quantitative easing, and there is much discussion about its impact on emerging market flows. Low interest rates in the west have been driving money into Asia for months now, to the point that more and more discussion concerns capital controls. Thailand has already started the process, one could argue Indonesia has too, and Korea looks likely to be next. These countries fear a bubble, and one may well be forming. But if that flow of capital is only being exacerbated by US quantitative easing, then isn’t it a bit early to be calling the top of the market? There’s a lot more money likely to come in to emerging market equities before it all starts fleeing out again.

The shareholders and companies who are selling out are in some cases hedging their bets: selling part but not all of a stake, knowing that the market might go higher but that good valuations are available today. But these sellers – Hong Kong property magnates, Singapore sovereign wealth funds, US private equity houses and investment banks – are not stupid, and there’s no question there are good reasons to be looking nervously for froth in Asian stock markets from now on.

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