"Sell in May and go away": does it work for Asian stockmarkets?

We take a look at the hard data to see how they stack up against the popular market saying and find one market where it might be helpful.



Robin Parbrook
Co-Head of Asian Equity Alternative Investments
King Fuei Lee
Co-Head of Asian Equity Alternative Investments

Invariably at this time of year, the old adage of “sell in May and go away” starts to ring again. The saying stems from an informal observation that the months from May to October typically delivered lower returns compared to the other months of the year.

As such, investors could be better off selling their stocks and holding cash, before returning to markets in November.

A range of academic studies have found evidence of this “Halloween Indicator” (which we think is a far more professional-sounding alternative name to the adage).

For example, a paper published in the American Economic Review1 in 2002 actually discovered evidence of this seasonality effect. The authors Sven Bouman and Ben Jacobsen investigated 37 different markets over the period of 1970-1998, and found that 36 of the countries in their sample had evidence of this “sell in May” effect.

However, the adage has been disproved as far as the FTSE100 is concerned and data appear to be less conclusive in Asia Pacific.

Crunching the numbers

According to our calculations, over the period of 1990-2016 the regional Asia ex-Japan market has typically delivered a median return of +2.8% over the months of May to October, with the returns in 17 of those 27 periods being positive.

Across the various countries in the region, there is also scant evidence of the Halloween effect. In fact, in Hong Kong, there is a decidedly anti-Halloween effect, with the median return of the market being +8.1% and delivering positive returns in 19 of those periods.

One exception

However, there is indeed one country in this region where the “sell-in-May effect” appears to be particularly strong, and that is Taiwan.

Over the period of 1990-2016, the MSCI Taiwan index has delivered a median return of -6.0% during the months of May to October, with the market posting positive returns in only 10 out of the 27 years.

On a monthly basis, the months of May, June, July and August have historically delivered negative returns, with the numbers being particularly ugly in May and August.

Valuation indicators

Our valuation indicators for the country have also started to be updated. After a market rally of +38%, the market now looks far less attractive.

Please remember that past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.  

1. Bouman, Sven, and Ben Jacobsen. "The Halloween indicator," Sell in May and go away": Another puzzle." The American Economic Review 92.5 (2002): 1618-1635.


Robin Parbrook
Co-Head of Asian Equity Alternative Investments
King Fuei Lee
Co-Head of Asian Equity Alternative Investments


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