Digitally savvy retail investors turn to foreign stocks
PETALING JAYA: Easier digital access and better awareness support the growing interest of local retail investors in foreign stock markets.
It is also, in part, a continuation of retail interest in equities following the liquidity-fueled market rally seen in 2020 and 2021.
Brokerage firms noted that this interest in foreign equities was a natural progression for investors, given the changing digital landscape.
“Retail investors who have taken a liking to local commerce are smart enough to know that portfolio diversification is the key to a sustainable portfolio.
“Supported by digital connections, the past few years have bridged the digital divide and created a new segment of younger, more digitally savvy investors who are comfortable diversifying into markets beyond Malaysia. “, Kazumasa Mise, general manager of Rakuten Trade, told StarBiz.
Mise added that since the launch of Rakuten’s online trading platform in May 2017, customers have consistently ranked a US stock market trading feature as their top product request, highlighting long-standing investor interest. local.
Given his young clientele, which are largely first-time investors, he has noted a tendency to focus on familiar meters such as Apple Inc, Meta Platforms Inc, Nvidia Corp and Tesla Inc.
Rakuten launched its US trading platform last month, which went live on January 27, and Mise said the response has been good so far.
“It is also a result of their confidence in the system as well as the experience and digital trading standards we have provided since our inception in 2017. We are very excited for this next chapter of growth,” he said. -he declares.
Still, Mise warned retail investors to be careful when looking at overseas markets and to ensure proper research on a security before making any investment.
With many newbie investors entering, financial literacy through legitimate and accredited sources is key to making smart trading decisions, he added.
“Investors should aim to invest the excess funds they have. As stock trading is a time-consuming process, emergency funds should not be invested.
“Investments will come with a certain degree of risk. To minimize this risk, investors should take the time to research and plan before making their trade. Investors should also be wary of stock picks provided by unlicensed individuals, as they may lack credibility or proof of their claims.
“We launched our Equity Sales division last year, a marketplace where licensed and experienced analysts provide trading ideas, insights and information to support the growing number of digital retail investors. It has been very well received until now. “
Notably, the US market is a more volatile market than the local stock exchange due to the sheer size of market participants. And while the S&P 500 has doubled since the start of the pandemic, the prospect of monetary tightening is weighing on stock market valuations.
According to Kenny Yee, head of research at Rakuten, the Federal Reserve’s gradual cut and hike in rates is expected to reduce overall equity market liquidity. As a result, valuation premiums should shrink, especially for tech stocks that trade at exorbitant ratios.
Given this, the brokerage expects global market volatility to increase as sentiment has turned cautious with diminishing risk appetite. That said, Mise pointed out that diversifying the portfolio across markets will help retail investors navigate market volatility.
“When your stocks are spread across multiple sectors and markets, and a particular sector or market is not performing well, only some of your stocks will be affected, minimizing your risk of loss,” he said.