Why foreign investors should trade stocks in Asia
Asian stock markets and exchanges date back over 150 years. In the past, population booms, world trade and post-war industrial expansion were the main economic drivers of the soaring Asian markets. In recent times, the tech boom has been the main driver of fast growing Asian economies, such as Vietnam, Japan, Indonesia and Singapore.
The Asian stock market consists of 49 different exchanges, corresponding to 49 different Asian countries. That’s a lot of business opportunities!
The Hong Kong and Singapore stock exchanges are the backbone of any good brokerage. The three largest Asian stock exchanges are the Shanghai Stock Exchange, the Tokyo Stock Exchange and the Hong Kong Stock Exchange. Together they have a trading volume of almost $ 8 trillion in 2015. You will realize how huge this market is when you consider the 49 different Asian exchanges and the thousands of listed securities.
Simply put, as a foreign investor, if you don’t trade Asian stocks, you are leaving money on the table.
I have put together a comprehensive list of 5 reasons why you should trade Asian stocks.
1. Asian economies are booming
Collectively, Asian economies have grown steadily for many years. Even now, the economies are still booming. The respective economy is complemented, and thus, the continent remains formidable. Asia has a reputation for being one of the longest economic booms in a region.
According to US News and World Reports, five Asian countries are among the 19 best countries to invest in. Recently, Forbes also listed four Asian countries like Vietnam, Cambodia, Myanmar and Thailand in the top 10 best emerging markets of 2020.
About seven Asian countries have experienced more than five decades of annual GDP growth exceeding 3.5%. In addition, eleven Asian countries have benefited two decades of annual GDP growth exceeding 5%. A few Asian economies, like China, have seen years of GDP growth of over 6%! That’s even higher than the US GDP growth rate which has fluctuated between 0.5% and 3.8% per year since it was hit by the 2008 financial crisis.
2. Asian stock markets are recovering
Although Asian economies are booming, around two-thirds of the Asian stock market is down. The Shanghai Stock Exchange, for example, was down more than 20% in 2018. But currently, these affected markets are showing economic signs of recovery. This could be a huge opportunity for you.
You have to watch market sentiment to fully understand what types of parts are available. You can make profits by trading penny stocks, regardless of what the market as a whole is doing.
When an economy booms, but the stock market suffers, there will most likely be some undervalued stocks to buy. It was the buy low and sell high strategy that made Warren Buffet a billionaire.
Guillaume Rondan from Movetoasia.com advises and to guide investors to take a look at the Vietnamese stock market investments.
It is also important to remember that there are penny stocks in other Asian countries. You can trade penny stocks on any of the 49 Asian stock markets.
3. Lower costs and better results
Typically, brokers charge high commissions when asked to transact internationally. To curb this, you need to open a brokerage account in Asia. Do not use your European or US account to trade Asian stocks. You need to capitalize on the growth of the Asian stock market and use the trade stocks at lower rates. It becomes as easy as trading stocks in most other places.
4. Less competition, more return
This is true for the trade actions of small Asian countries like Malaysia and Vietnam. This is another reason why you should open an Asian brokerage account. Otherwise, you will be depriving yourself of the many benefits that come with investing in emerging economies.
Small regional markets like these do not have much of a trend with the rest of the world. And so, these countries have many hidden gems with almost no professional analyst coverage. Therefore, there is very little competition from large companies.
To maximize this strategy, don’t just trade stocks in markets where each entity buys assets. Research emerging markets and focus your investments on these treasure chests.
Please note that although the online brokerage account you already have will allow you to trade in Japan or China, it will not allow you to buy stocks in Malaysia or Vietnam. You will need to open a local account for this.
5. An opportunity to diversify
Investing in Asian markets is a sure way to diversify your investment portfolio. As an investor, you should never put all of your eggs (investments) in one basket (stock or market). This is what diversification entails. This is a step you need to take to reduce the risk of losing everything, if there are any uncertainties in the market.
Instead of investing only in real estate, for example, you should pay attention to other markets. The Asian stock market is a good place to start. Take your time, study the markets and choose the best option for yourself.
Asian stock markets present a new layer of risk. In the world of the stock market, this means a new layer of returns on investment.
The Asian stock market is very promising. Booming economies and recovering markets are good reasons why foreign investors like you should trade Asian stocks. Either you win or you lose; your result depends a lot on the effort you put into it.
Different countries have different stock market rules. So even if you are very familiar with the New York Stock Exchange, you might be new to the Asian market. Research. Hire a broker. Network with other traders. Trade, but don’t overdo it by trading different markets at different times.
Pick a market to trade in, stick to it until you get the hang of it.
Have a good negotiation!