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SINGAPORE: Real estate agent Alan Toh is not someone who frequently trades the stock market.
But after world markets fell 30 percent in March as a result of the coronavirus pandemic, he couldn’t resist diving into the market for bargains.
“During the March correction, I was concerned that prices would drop even further,” he told CNA Insider. “I only picked up the upward trend in April.”
Despite gloomy economic outlook amid the COVID-19 crisis, US equities have rebounded strongly from their March lows, including some of its investments in tech stocks, such as Apple, Facebook and Alibaba.
Alan Toh.
He calculated that he made a five-figure profit on these investments. He declined to say exactly how much he has made from the ongoing rally, only that it is below S $ 50,000.
“I benefited from the market situation, with the rally in US and technology stocks,” said the 44-year-old. “I am not a day trader, but if I see a price correction, I will go in.”
READ: Five Things You Need To Know Before Investing In The Stock Market Rally
READ: Here’s why stock markets are challenging the economic reality of COVID-19 – A comment
KGI Securities (Singapore) analyst Joel Ng has seen how the stock market crash earlier this year has boosted trading activity among retail investors who had been out of the market for the past few years.
The trading volume of his brokerage house increased 50% in March compared to February. “Another group is new investors, some of whom have been following the rebound in the US stock market. People see Apple shares go up, “he said.
And once the market is euphoric, there will be more investors.
However, there is also a note of caution for them in this increased investment.
COMMERCIAL COSTS HAVE DOWN
It is not just Singapore that is experiencing this retail boom. Ordinary people from countries like China, the US, Japan and Malaysia have also turned to the stock market in a big way.
Citadel Securities in the US told Bloomberg in July that retail traders account for about 20 percent of stock market trading and up to 25 percent on busiest days, up from 10 percent last year. .
A man wearing a face mask walks past television screens outside the Nasdaq market site in Times Square in New York, the United States, March 9, 2020 (Photo: Reuters / Shannon Stapleton)
Buying and selling securities has never been easier, with trading costs falling in recent years.
“Trading costs used to be high, S $ 10 to S $ 50 to buy a share. So you had to make sure you were making a good decision. And you couldn’t trade frequently, ”said Ben Charoenwong, assistant professor of finance at the National University of Singapore Business School.
“We had a trend going into COVID-19 where (lower business costs) made it easier for people to participate in the market.”
Ng agreed, saying: “Based on anecdotal evidence, the lower prices have created more interest.”
The same goes for smartphone apps, opening up a world of online stock trading. “Working from home also helps; people have more time and flexibility to trade, ”he added.
Automated advisory platforms such as Syfe and StashAway have also become popular recently, saying they have benefited from changes in the stock market.
Syfe said that between February and June, when “the market crashed and then recovered,” its number of clients and assets under management grew threefold.
The company added that over the past two months, “the most optimistic investors have benefited significantly from the market rally, with our pure equity portfolio appreciating more than 14 percent during this period.”
StashAway also said it saw growth, with its net deposits up 47 percent from Dec. 31 to March 31, and its assets under management grew 4.3 times in the 12 months ending June 30.
THE RISK APPETITE HAS GROWN
The rebound in equity markets around the world in the wake of the COVID-19 pandemic has been partially driven by this surge in demand from retail investors.
There is also hope that stimulus efforts by various governments will support their economies, amid encouraging reports about companies developing Sars-CoV-2 vaccines.
And with central banks lowering interest rates, many investors have decided to take a chance on equities, as the safest investments are “offering lousy returns amid ultra-accommodative central bank policies,” said the president and chief executive of the central bank. Securities Investors Association (Singapore), David Gerald.
Investors are also taking a broader view, having canceled this year, Vasu Menon, OCBC Bank’s executive director of investment strategy for Wealth Management, said on the Money Mind show recently.
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“The interest rates are extremely low; there are not many opportunities in many asset classes. Stocks offer promising upside potential in the next two to three years, so there are bargain hunters looking to buy, ”he said.
According to Singapore Exchange (SGX) data cited in a CNA article on July 23, Singapore-listed stocks had received a net increase of S $ 6.8 billion in retail funds since January 6.
That more than offset the S $ 5.7 billion net outflow from institutional investors. During the same period, the average daily security turnover on the SGX for each month increased by approximately 48 percent compared to the previous year.
READ: Comment: SGX sees a boom in retail investments. But can it last?
Gerald noted that this increase in retail participation is not limited to securities but is occurring in all investments, including currency trading and Contracts for Difference, allowing for asset speculation without physical ownership or delivery of the asset. active.
BEWARE OF VOLATILITY
However, the current volatility of the stock market is cause for concern, as daily movements of 2 to 3 percent in the Dow Jones Industrial Average and the S&P 500 are becoming increasingly common, Gerald said.
Since these moves will invariably spill over to the Straits Times Index, he reminded retail investors of the importance of opting for high-quality stocks with strong balance sheets and doing your homework before investing.
“As the pandemic continues… people will continue to lose income and jobs. The shares will not look so attractive under those conditions, “he added. “So, can this increase be sustained?”
David Gerald.
The worst case scenario, Charoenwong warned, is for an investor to lose his job and the value of his equity portfolio to fall at the same time. He said investors shouldn’t put all their money in the stock market.
“You have to be clear about your objective… Why do I want to invest now? Is it just because I have cash or because I heard from my friends that they are investing? ” he said.
“Are you gambling or is it a long-term investment?”
He added that investors should know their tolerance for risk and how much money they are willing to lose in the market.
A regional marketing manager, who declined to be named, is very familiar with excessive market speculation.
Bullish on the oil and gas sector in 2018 and last year, it borrowed money from banks and took advantage of equity guarantees. He soon found himself facing a loss of S $ 150,000.
“I made money from the shares between 2013 and 2016, between 100,000 and 200,000 Singapore dollars. I was so confident that I thought the stock market cycle would repeat itself, ”he said, adding that he had invested those gains in deals that subsequently failed.
Unable to repay her loans, she approached Credit Counseling Singapore for help with her debt restructuring. This year, it has been kept out of the bag.
“Investing is still essential, but you must have capital (to invest), rather than borrowing funds from other people. Trade within your limit and earning capacity, ”she advised.
