How to trade stocks in Asia the right way
A table showing Schwab’s international trading fees. Is your trade size large enough that the $ 50 commissions do not affect overall returns? Because that is the reality of buying stocks in Asia through a broker outside of the region.
Trade stocks in Asia with an offshore broker
However, using your US or EU account to buy and sell stocks in Asia is not an ideal investment method at all.
Why shouldn’t you trade with your regular broker? For starters, you forgo key competitive advantages. This takes away many of the benefits of investing abroad in the first place.
By the very nature of stocks listed in New York or London, you are now in competition with multi-billion dollar hedge funds and other large institutional investors.
Banks, hedge funds, and other institutional buyers have complex algorithms and thousands of highly paid researchers. Can you really extract value from a market when your competitors do deep analysis and execute trades in under a second?
Very rarely, some retail investors systematically outperform the market. But a hedge fund will typically get real mathematically proven âvalue stocksâ while an individual investor waits for Google Finance to load.
This is also why I prefer smaller exchanges, especially those from Malaysia and Vietnam. Countries like these have hundreds of hidden gems with almost no analyst coverage.
If you only trade in markets where everyone is buying assets, it may be worthwhile to allocate your portfolio differently.
Of course, the online brokerage you already use can allow you to trade in Japan or China. Still, they almost certainly won’t allow you to buy stocks in Vietnam or Malaysia. You will probably need to open a brokerage account in Asia to access the more exotic, emerging and frontier markets.
In short, you severely limit your investment options by not opening a local brokerage account in Asia. Most stocks on the continent don’t have secondary listings, and even when they do, that usually means higher fees and less cash.
More options, higher returns and lower fees
Maintaining your ability to find hidden treasures in frontier markets such as Indonesia and the Philippines is not the only reason to open a brokerage account in Asia.
You will also save a lot of money in fees by setting up a local account in the area. Brokerage firms often charge extremely high commissions on international stock transactions.
For example, loyalty (a major broker in the US) charges HK $ 250 to buy or sell a stock in Hong Kong, or US $ 32 per trade. A local account such as Boom Titles charges HK $ 88, or only US $ 12 per transaction for comparison.
Trading stocks in Asia is similar to trading anywhere else in the world once you have opened your brokerage account. I won’t go into specifics or specific stock recommendations – they depend entirely on where you’re trading.
Some markets, including the Tokyo Stock Exchange, have lunch breaks while others have minimum orders and other quirks.
But like most things in life, your end result depends on how much effort you’re willing to put in.
The best way to buy stocks in Asia is to open a local brokerage account in a regional financial center like Singapore or Hong Kong and invest directly.
Don’t just trade shares of Sony, Alibaba, or other âeasily boughtâ assets on Western exchanges.