A pedestrian walks past a stock board displaying the Nikkei 225 Stock Average figure, outside a securities firm in Tokyo (file). The volume of Japanese shares changing hands more than doubled in 2013 from the previous year as traders rushed to bet on Japan's aggressive approach to stoking growth and ending deflation. Dow Jones/Tokyo Investment banks and brokerages across Asia were bolstered last year by a surge of activity in Japan's equity markets, masking an otherwise mild year for stock trading and share issuance in the region. The volume of Japanese shares changing hands more than doubled in 2013 from the previous year as traders rushed to bet on Japan's aggressive approach to stoking growth and ending deflation. That led to a boom in commissions that brokers earn to handle orders from institutional investors such as large fund managers, and some investment banks hired new staff in Tokyo to handle the flood of orders as the market rallied. Consulting firm Greenwich Associates estimates that as of August, institutional commissions for Japanese stock trading had risen at least 40% in yen terms from the same period a year earlier, easily outpacing the consulting firm's estimates for the rest of Asia . Japan also kept traders busy funnelling newly issued shares to investors. Equity capital market revenue drawn from the country nearly doubled from 2012 to $1.38bn , according to data provider Dealogic. That compares with a 13% decline in revenue from China , which came close to snapping a three-year streak at the top of the heap with $1.4bn in revenue last year. "Most foreign financial institutions had a good year in Japan – the question is whether it's sustainable," said Emmanuel V Pitsilis, co-head of McKinsey & Co's corporate and investment banking practice in Asia . The average value of Japanese shares traded daily in 2013 jumped 127% over 2012, according to data compiled by agency broker ITG. Turnover nearly quadrupled in May after the Nikkei 225 index jumped 12% in April, at the time its biggest one-month rise in more than three years. The index ultimately closed 2013 with a 57% gain. Japan was a standout amid largely sluggish trading and deals in Asia's other major markets. The average value of South Korean shares traded daily slumped 13% last year, while trading in Australia was flat. Turnover in Hong Kong rose 24%. Pitsilis noted the first two "arrows" of Japanese Prime Minister Shinzo Abe's growth strategy-boosting money supply and public works spending-had an immediate impact on stock valuations and market volumes, boosting equities commissions. Abe's third arrow-initially a disappointment to investors when it was rolled out in June-promises longer-term changes to Japan's economy and requires greater faith from investors. Still, the country's comeback in the eyes of investors was a much-needed development for international investment banks and brokers struggling with weak stock trading in Asia , a squeeze of commissions due to lower-cost electronic trading and costly expansions in the region that have yet to fully pay off. At Nomura Holdings , one of Japan's biggest brokers, sales of Japanese equities accounted for roughly 40% of the firm's global equities revenue last year, said Naoki Matsuba , Nomura's co-head of global markets in Tokyo . Matsuba said he expects Japanese equities will again make up a high portion of that revenue in 2014. Swiss investment bank UBS AG bulked up staff dedicated to trading and sales of Japanese stocks and research, adding 13 new employees to that group in 2013, Tokyo -based spokesman Jason Kendy said. "Going forward, we are strategically looking at further build-up," he said. Such bulking up defied the expectations of industry recruiters who initially expected further cuts to struggling Asian operations last year. It also points to the delicate task the industry faces in trying to meet the many demands of operating across Asia's diverse markets. "The fact that Asia hasn't exploded in the past three years like some expected...that has put a damper on three- to five-year plans," said John Feng , a managing director in the securities and trading practice at Greenwich Associates . But that shortfall hasn't slowed the industry entirely, he said.
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