As US markets are attracting interest from some investors looking to diversify their portfolios, Rakuten Trade Sdn Bhd’s Head of Research Kenny Yee advises newbies to these markets to start by trading stocks they are familiar with. , preferably buying during periods of decline.
Yee says: “US markets are more liquid, with higher market volatility than Bursa [Malaysia], and investors should plan their trading strategies accordingly. Investors will need to catch up on news more frequently and implement more stringent stop-loss plans. »
He adds that investors should avoid trading on emotions. “It can be hard to resist selling off your holdings when stocks are trending down in valuation. For fundamentally sound stocks, however, declines in value are likely to recover, and investors shouldn’t make rash decisions based on their emotions at the time.
Additionally, the risk of loss can be high if investors decide not to expose their portfolio to a wider range of assets.
“For example, if one were to invest only in tech stocks, any event that lowers the value of the sector would affect the value of all stocks in one’s holdings,” he says.
Before investing in stocks, Yee advises investors to do enough research to determine and understand when to buy and when to sell, otherwise they could be caught in a downtrend and suffer a loss in value.
Global markets faced a strong sell-off last week after Russia launched attacks on Ukraine. Will this affect local investors’ interest in US markets?
“We’re seeing a negative feeling, but I think it’s just a knee-jerk reaction,” Yee says. Amid heightened volatility in US markets, he believes the buy-on-bottom approach remains prevalent.
“The volatility in the United States is very high and the business risk is also very large. Investors should first remain cautious. If they feel the US markets have gone down enough, then just do some bargain hunting. Things and the feeling will improve,” he adds.
Meta Platforms Inc, Apple Inc and Advanced Micro Devices Inc were among the most actively traded US stocks by Rakuten retail clients over the past month. Year-to-date (YTD) their stock prices are down 41%, 9.9% and 23.72% respectively.
Shares of Meta, the owner of Facebook, plunged 26% on February 3 this year, the largest single-day drop in the market value of a US company, after posting dismal results due to changes of Apple’s privacy and increased competition.
In contrast, Apple posted its biggest share price rise in a year and a half in January, buoyed by its record quarterly results.
Notably, the Vanguard S&P 500 ETF exchange-traded fund is one of the preferred choices for Malaysian investors. It tracks the performance of the Standard & Poor’s 500 Index and primarily holds large-cap US stocks.
Stock Picks for US Markets
The few stocks on an uptrend worth looking at include Keysight Technologies Inc, Walmart Inc and Pfizer Inc, Yee says, and their values should continue to rise in the near term.
Keysight Technologies – which offers electronic measurement services using wireless, modular and software solutions – is expected to climb in line with the movement of other technology stocks, although its shares are down 25.7% since the start of the month. year, notes Yee.
Being involved in operating discount stores, supercenters and neighborhood markets, Walmart is expected to move away from its rising trend line, he adds. Since the start of the year, it has slipped 6.7%.
Meanwhile, the recent increase in Covid-19 cases bodes well for Pfizer, which should continue its long upward trendline for the foreseeable future.
After falling from a record low of US$61.71 last December, Pfizer was trading near its oversold zone.
Based on Bloomberg data, the consensus target prices of $201.36, $163.33, and $59.36 for Keysight, Walmart, and Pfizer, respectively, represent increases of 31.3%, 20.9%, and 26.6%, compared to their closing prices of $153.35, $135.05 and $46.87 respectively.
Currently, more than 900 US stocks and ETFs are tradeable on Rakuten’s platform, based on its recent client newsletter.
Banking on foreign trade interests
It has been a month since Rakuten Trade Sdn Bhd launched its Foreign Trade Services, which allows investors to invest in US markets. While refusing to disclose how many of its Malaysian clients have started trading US stocks, the online brokerage firm says the response has been tremendous.
“Given the service has just launched, this is just the beginning. So far, we are very happy with the response,” Rakuten CEO Kazumasa Mise told The Edge.
“We’ve had a steady stream of account requests since, and on the first day of trading when we saw our clients trading well-known stocks and ETFs in the US such as Apple, Tesla, Intel, Microsoft and Vanguard S&P 500. This is the result of our clients’ trust in the system, our research team and the digital trading experience and standards we have provided since the inception of our platform in 2017. We are very excited about this next chapter of growth.
More than 240,000 accounts have been activated since the launch of Rakuten – a 50/50 joint venture between Japan’s Rakuten Securities Inc and Kenanga Investment Bank Bhd – in 2017, and US market trading has been the most popular feature. requested, according to Mise. “The US market is a natural next step in Rakuten Trade’s growth, with a wider range of stocks and more opportunities for investors.”
Similarly, Mise notes that it is important for Malaysian retail investors to diversify their portfolios across different markets. “We believe that investors in Malaysia are eager to take the next step to becoming global investors. This not only provides investors with more investment opportunities, but also allows them to spread their risk across multiple markets,” he said.
“Trading foreign stocks in US markets may also have been nearly impossible for these Malaysians in the past, mainly due to the lack of digitalization, high transaction costs and the perception that trading foreign stocks can only be done by seasoned investors. With today’s technology, however, traders can not only trade in the United States, but also have access to a huge range of digital resources – from education to trading ideas – right at their fingertips.
By leveraging the market diversification strategy, he said, Malaysian investors will continue to build their portfolios with a mix of local and foreign stocks.
“It can protect parts of their portfolio from loss if a market were affected. and risk appetite increase.
The three major indexes of U.S. markets — widely seen as more volatile and liquid than most markets — have had three-year winning streaks. In 2021, the S&P 500 rose 26.9%, followed by gains of 18.7% and 21.4% respectively for the Dow Jones and the Nasdaq.
In contrast, Malaysia’s benchmark FBM KLCI lagged the regional market, falling 3.7% in 2021 after rising 2.4% in 2020.
Despite the strong returns in US markets, Mise stresses that it is imperative that the risk appetite of a retail investor wishing to enter US markets is coupled with a sound trading strategy.
“Investors can make sound investment decisions, regardless of their trading experience, by doing their own research and sticking to a trading plan. However, when it comes to finding educational content on foreign stocks online, investors should be careful to use only investment advice from approved persons.
Asked about the impact of easier access to foreign stock markets on trading in Bursa Malaysia, Mise said, “It really depends on market sentiment. We encourage our clients to work on diversifying their portfolio. By providing our clients with another market choice to trade in, [we can help them] extend the reach of their investment portfolio across sectors and markets, thereby increasing its holding value and minimizing the likelihood of loss of value.
“For example, if a particular market or sector is not doing well, it will rebalance with others that are performing. This optimizes the overall portfolio to a healthy level.
After its successful expansion into the US market, Rakuten plans to launch Hong Kong market access in Malaysia in the fourth quarter of this year.
Mise says, “In addition to launching new markets, we are also committed to bringing new features to our service offerings, including the much-requested US dollar currency trading account.”