A Comprehensive Guide To Understanding The Asian Stock Trading Market 2022.
If you want to invest as an expat or high-net-worth individual, which is what i specialize in, you can email me (advice@adamfayed.com) or use WhatsApp (+44-7393-450-837).
Introduction
There are dozens of investing opportunities in Asia, ranging from steady large-cap shares in Singapore to high-growth frontier market stocks in Vietnam.
Why should you trade equities in Asia? One of the most important reasons is to increase your total variety. Your portfolio will be less reliant on the performance of your home market if you invest abroad.
Foreign stocks hold your money and pay dividends in a currency other than the one you’re used to. Purchasing assets denominated in a stable currency will thus increase the overall diversification of your portfolio.
Over the last few decades, the Singapore dollar and Korean won, to name two examples, have consistently gained in value against major global currencies.
Some countries are less connected with the global economy than others, and investing in the proper regions can help you protect your portfolio even more.
Asia’s emerging and frontier markets are especially decoupled from the global economy. We’re talking about places that are fast expanding due to internal reasons such as a high rate of urbanisation and a young average age. Not the international financial markets’ performance.
Meanwhile, Asian frontier markets like Indonesia, Cambodia, and the Philippines are less likely to be impacted by any crisis that starts in the West.
You can benefit from higher returns during good economic times and lower losses during bad economic times.
However, stock exchanges in Asia vary greatly in terms of size, potential opportunities, and foreign investor accessibility.
Below is a quick rundown of Asia’s major stock markets, which number sixteen in total. Even though this isn’t an entire list, it’s a nice place to begin. Individual papers are also available that go through each single equity exchange in further depth.
How Do Asian Stock Exchanges Work
Asian stock exchanges bring together the financial centres of a number of Asian countries, including, of course, China, the world’s second largest economy. However, it is not the only one. The Asian stock markets’ nomenclature also affects industrialised countries like as South Korea, Japan, and Singapore. With the Middle East and Far East, these countries alone account for almost half of the world’s population, and hence have significant economic clout.
However, European investors rarely speculate in Asian markets with which they are unfamiliar. The financial media pays minimal attention to these exchanges’ assets, and the lack of closeness, as well as currency effects, may deter some traders. Nonetheless, the Asian stock markets are brimming with popular and intriguing stocks like Alibaba, Nintendo, and Toyota.
Review Of The Major Stock Market Indices On Asian Stock Exchanges:
Trading on Asian stock exchanges essentially boils down to buying and selling equities that make up the key Asian stock market indices. Two important essential indices of Asian financial centres are described in greater depth here.
The first is the Nikkei 225, which has been around since 1949 and serves as the benchmark index for the Tokyo Stock Exchange as well as the Asian continent. It’s made up of 225 firms in 35 categories, and it’s calculated in the same way as the Dow Jones, which means it’s based on stock prices. This index comprises some well-known equities such as Sony, Canon, Toyota, Nissan, Suzuki, SoftBank, and Nomura, as well as three important sectors: industry, consumer discretionary, and finance. The Nikkei 225 had a very strong run in the 1980s, reaching a bullish record of 38,957 points in 1989, when the Japanese economy was expanding. As a result, Japanese capital repatriation from the United States broke the bubble, causing the dollar to decline against the yen, putting pressure on the Japanese economy and leading to the index’s collapse. Since then, the country has been slowly but steadily recovering from the crisis, with the price of the index primarily growing since 2003, despite the effects of the dot.com bubble burst in 2000 and the subprime mortgage crisis in 2008.
The Hang Seng Index, which has been active since 1969 and is the benchmark indicator for the Hong Kong Stock Exchange, is another Asian index to keep an eye on. It’s worth noting that this stock exchange is inextricably linked to the Chinese stock market because of their long-standing relationship dating back to the 1980s. Many Chinese companies are listed there as well, taking advantage of market circumstances that the Shenzhen financial centre cannot provide. Alibaba, Geely, Tencent, Petrochina, CNOOC, Sinpoec, China Mobile China Unicom, and ICBC are among the companies represented in this index. The index has historically lost a lot of money during the Southeast Asian crisis of 1997. The subprime mortgage crisis had a significant negative impact on this index, which fell by 66.5 percent to its lowest level in history between 2007 and 2008.
When Should You Trade On Asian Stock Exchanges And At What Times
Trading on Asian stock exchanges while residing in Europe necessitates knowledge of various financial institutions’ operating hours as well as consideration of time variations. Live trading necessitates watching the markets all night. Asian markets feature a morning and an afternoon session, with both closing between 12 and 1 p.m. They also close sooner than other financial centres, such as stock markets in Europe.
We know that the Japanese Stock Exchange operates from 9 a.m. to 11 a.m., and again from 1 p.m. to 3 p.m. In Europe, this refers to the hours between 1 and 7 a.m.
Quotes are held between 9:30 a.m. and 12 p.m. and 1 p.m. and 4 p.m. on the Chinese and Hong Kong stock exchanges, respectively. This corresponds to a time slot between 2 a.m. and 8 a.m. in the European time zone.
What Factors Have An Impact On Asian Stock Markets
Naturally, if you wish to invest in Asian stock markets, you must first understand the aspects and elements that drive their development. Given that Asia is a true global economic hub, you should pay attention to economic statistics that can lead to high volatility over a session. GDP, inflation, manufacturing and non-manufacturing indicators, and consumer confidence are among the most important data.
You should also keep an eye on the foreign exchange market, as Japan, for example, is one of the most export-oriented countries. The value of the Yen in relation to other currencies is thus a factor that can have a significant impact on the stock market.
The geopolitical situation in China, as well as trade agreements with the rest of the world, are signs that must be closely monitored.
There is also a correlation between Asian market indexes and global stock indices that can be used to speculate on these stocks. We know that the stock exchanges in China and Japan open a few hours after Wall Street closes. As a result, when these Asian stock markets open, the signal supplied by the US stock market typically has a direct impact on their trajectory.
How To Invest In Asia’s Biggest Financial Centers
You’re certainly curious about how you might speculate and take positions on Asian stock markets from Europe. Although banks offer a few unusual stock market investments that provide access to these values, trading Asian equities and indexes with CFDs supplied by internet brokers is the simplest solution.
You can do so by opening an account with an online trading platform and taking positions on the prices of hundreds of Chinese, Japanese, and other major Asian stock exchanges.
One of the benefits of these trading platforms is that they combine a variety of decision-making and strategic tools, as well as analysis tools with innovative and configurable charts and even targeted news feeds based on the financial centre or Asian assets in which you want to invest.
Adrs And Secondary Listings? Not Always A Possibility
Outside of their home market, Asian companies frequently have secondary listings. In New York and London, secondary listings are the most common.
For instance, Baidu is traded on the NASDAQ, but Toyota is traded on the NYSE via American Depository Receipts (ADRs).
However, many ADRs have a low volume relative to the main listing in their home market, making it difficult to sell quickly or at a reasonable price.
It’s worth noting that outside of Asia, the United States has the biggest concentration of publicly traded companies. As a result, trading equities in Asia through a U.S. brokerage account is a popular choice among North American investors.
Using An Offshore Broker To Trade Stocks In Asia
Using your American or European account to buy and sell stocks in Asia, on the other hand, isn’t the best way to invest.
Why should you not use your regular broker? To begin with, you’re sacrificing significant competitive advantages. It eliminates a lot of the benefits of investing offshore in the first place.
Trading stocks on the New York or London stock exchanges puts you in direct competition with multibillion-dollar hedge funds and other huge institutional investors.
Banks, hedge funds, and other institutional buyers employ thousands of highly paid researchers and use complex algorithms. Can you truly extract value from a market when your competitors do in-depth study and execute deals in a fraction of a second?
Rarely, some retail investors outperform the market on a consistent basis. While an ordinary investor waits for Google Finance to load, a hedge fund will generally get to any actual, mathematically-proven “value stocks.”
This is also why I favour smaller exchanges, such as those in Malaysia and Vietnam. Hundreds of hidden jewels exist in countries like these, with absolutely little analyst coverage.
It might be worth arranging your portfolio differently if you’re just trading in markets where everyone else is buying up assets.
Of course, your current online brokerage may allow you to trade in Japan or China. However, you will very likely be unable to purchase equities in Vietnam or Malaysia. To gain access to the more exotic, emergent, and frontier markets, you’ll almost certainly need to open a brokerage account in Asia.
In other words, by not creating a local brokerage account in Asia, you are drastically limiting your investment alternatives. The majority of equities on the continent lack secondary listings, and when they do, it usually entails greater fees and fewer liquidity.
Increased Returns, Lower Fees, And More Options
The possibility to unearth hidden gems in frontier markets like Indonesia and the Philippines isn’t the only reason to register an Asian brokerage account.
You’ll also save a lot of money on fees by establishing a local account in the area. On international stock trades, brokerage firms frequently impose exorbitant charges.
For example, to purchase or sell a stock in Hong Kong, Fidelity (a big US broker) costs HK$250 – a ridiculous US$32 per exchange. By comparison, a local account like Boom Securities charges HK$88 per trade, or US$12.
Once you’ve opened your brokerage account, trading stocks in Asia is identical to trading equities anyplace else in the world. I won’t go into particular stock suggestions or details because it all depends on where you’re trading.
Lunch breaks are observed in some markets, such as the Tokyo Stock Exchange, while others have minimum orders and other peculiarities.
However, like with most things in life, the end result is determined by the amount of effort you are prepared to put forward.
The best option to buy stocks in Asia is to open a local brokerage account and invest directly in a regional finance hub like Singapore or Hong Kong.
Don’t rely on western exchanges to trade Sony, Alibaba, or other “easily obtained” assets.
Asia’s Largest Stock Exchanges
Hong Kong Stock Exchange (HKX)
Hong Kong is a worldwide city with a big stock exchange that serves as China’s financial gateway to the rest of the world. There are almost 2,500 firms listed here, with a total market capitalization of $6 trillion USD.
Because all main Chinese exchanges are linked, opening a Hong Kong brokerage account also gives you access to all of Mainland China’s stock markets.
Anyone dealing in Hong Kong can also access Shanghai’s exchange through the Hong Kong Stock Connect (HKEX). This is in addition to the smaller Shenzhen Stock Exchange, which focuses on technology. It’s a three-for-one deal, with a fourth on the way once the newly founded Beijing Stock Exchange is joined.
Tokyo Stock Exchange (TSE)
The Tokyo Stock Exchange is one of the world’s largest, with over 2,000 listed businesses and a market capitalization of more than $5 trillion.
Japan is one of Asia’s most accessible markets, with practically every major brokerage business in the United States and Europe allowing you to trade internationally on the TSE.
However, don’t expect to uncover many unknown stock selections here, partly due to its accessibility. Japanese stocks are well-known around the world, and analysts cover them extensively. Furthermore, the country’s weak demographic trends portend a bleak future.
Exchange in Singapore (SGX)
The SGX is Southeast Asia’s largest stock exchange, with 776 companies listed and a market capitalization of about US$800 billion. Not bad for a city-state with a population of approximately six million people.
Singapore is Southeast Asia’s largest financial centre, so you won’t just be able to trade native equities here. Businesses from Thailand, India, and other countries frequently use Singapore as a primary or secondary listing.
Stock Exchange of Shanghai (SHE)
More than 2,000 firms are listed on Shanghai’s exchange, which has a total market capitalization of more than US$7 trillion.
If you’re a non-resident foreigner, you won’t be allowed to trade stocks directly in Mainland China. However, a brokerage account in nearby Hong Kong can be opened remotely. The Hong Kong Stock Connect allows you to access the Shanghai and Shenzhen exchanges more easily.
Korea Exchange (KRX)
With over 3,000 listed companies, South Korea’s stock exchange has a market capitalization of over $2 trillion USD.
The Korean stock market may appear modest in comparison to major East Asian exchanges such as China’s and Japan’s. With that stated, the Korea Exchange is the sole location to buy top-performing stocks such as Samsung and SK Hynix, neither of which has a secondary market in another country.
Asia’s Emerging Market Stocks
Thailand’s Stock Exchange (SET)
Thailand’s stock exchange is the second largest in the ASEAN area in terms of market value, trailing only Singapore.
You won’t be able to trade stocks in Thailand through your typical brokerage account situated in the US or Europe, as you won’t be able to do with nearly any of the other emerging market exchanges on this list. If you don’t already have one, you’ll need to open an overseas brokerage account in Asia.
Malaysian Stock Exchange
Malaysia, which is well-positioned to avoid the middle-income trap, is an emerging market on its approach to becoming a developed economy by 2030. It has strong demographic trends and is more open to international stock and property investment than other Southeast Asian countries.
The Bursa Malaysia stock exchange has a market capitalization of roughly $400 billion, putting it in the category of a mid-size stock exchange.
Stock Exchange of HCMC
The Ho Chi Minh City Stock Exchange (HOSE) and the Hanoi Stock Exchange are the two stock markets in Vietnam (HSE). Currently, each of them has roughly 400 Vietnamese stocks listed.
However, proposals to unify the two exchanges were recently unveiled. Before the end of 2023, the HOSE will list all stocks in Vietnam. The Hanoi Stock Exchange, on the other hand, will concentrate on bonds, derivatives, and alternative investments.
Stock Exchange of Indonesia
Indonesia has a population of over 270 million people (and growing). Naturally, it is home to one of the region’s major stock exchanges, with a market capitalization of almost $500 billion.
Given Indonesia’s economic growth potential and sheer size, the Indonesia Stock Exchange may potentially become the largest in Southeast Asia. To trade stocks in Indonesia, you’ll need to open a brokerage account in nearby Singapore. As a foreigner, foreign access to this burgeoning industry is still challenging.
Stock Exchange of the Philippines
The Philippines is home to Southeast Asia’s oldest continually operating stock exchange, which was founded in 1927. It is also one of the fastest expanding marketplaces in the region.
There are around 300 different equities to trade here. However, brokerages headquartered outside of Asia will almost never allow you to trade stocks in the Philippines. When it comes to investing in emerging market companies, this is a common occurrence.
To invest in Asia’s most profitable stock markets, you’ll need a local account. Fortunately, regardless of where you live on the planet, you can set one up remotely and by mail.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.
