Stock trading around the world fell to the lowest level since at least 2006 even as global equities entered a bull market, a sign to Barton Biggs that the rally has further to go.
The combined value of shares traded on the New York Stock Exchange, along with bourses in Shanghai, Tokyo, London, Hong Kong, Toronto, Paris, Sao Paulo, Mumbai and Frankfurt was about $79 billion of shares each day on average during the past 100 days. The transaction volume was the least since Bloomberg began compiling the data six years ago.
“There’s a huge amount of money that has been caught on the sidelines in a market that continues to creep its way higher,” Biggs, the founder of hedge fund Traxis Partners LP in New York, said in a phone interview Wednesday.
“I interpret it as a positive sign that not much of the potential buying power has been consumed by the advance so far.”
The MSCI All-Country World Index has climbed 20 percent from its Oct. 4 low as better-than-estimated reports on global manufacturing and the American job market signaled the world economy may weather Europe’s debt crisis.
Investors have pulled about $75 billion from U.S. equity mutual funds during the rally, data compiled by the Investment Company Institute show.
Biggs, who increased bets on stocks in December, said his net-long position in equities is currently about 70 percent. The former chief global strategist at Morgan Stanley said he favors Chinese shares and U.S. technology companies.
“It’s very painful for the money that’s on the sidelines that did not perform well last year and now they’re getting four or five hundred basis points behind the indexes,” he said. “There’s just a lot of money that has gone out of equities, and in the long run that money is going to come back.”
Louise Yamada, an analyst who uses patterns in price graphs to make forecasts, said Wednesday that the Nasdaq Composite Index has entered a bull market and stocks may continue to rally through the end of March. In December, she said that equity charts were signaling further losses.
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