PETALING JAYA: Easier digital access and better awareness are supporting growing interest among local retail investors in foreign equity markets.

       This is also, in part, a continuation of retail interest in stocks following the liquidity-fuelled market rally seen in 2020 and 2021.

       Brokerage firms noted that this interest in foreign equities was a natural progression for investors, given the changing digital landscape.

       “Retail investors who have gotten a taste for trading locally are smart enough to know that portfolio diversification is key to a sustainable portfolio.

       “Supported by digital connections, the last few years have bridged the digital divide and created a new segment of younger, more digitally savvy investors who are comfortable in diversifying into markets beyond Malaysia,” Rakuten Trade chief executive officer Kazumasa Mise told StarBiz.

       Mise added that since the launch of Rakuten’s online trading platform in May 2017, customers have consistently ranked a United States share market trading feature as their top product request, highlighting long-running interest among local investors.

       Given its young customer base, who are largely beginner investors, he noted a tendency of interest in familiar counters such as Apple Inc, Meta Platforms Inc, Nvidia Corp and Tesla Inc.

       Rakuten launched its US trading platform last month, which went live on Jan 27, and Mise said response has been good so far.

       “This is also the result of their confidence in the system as well as the digital trading experience and standards we’ve delivered since we started back in 2017. We are very excited for this next chapter of growth,” he said.

       Nonetheless, Mise cautioned retail investors to be careful when looking at foreign markets and to ensure adequate research into a stock before they make any investment.

       With the entry of many beginner investors, financial literacy through legitimate and licensed sources are key to making smart trading decisions, he added.

       “Investors should aim to invest the excess funds they have. As trading stocks is a process that takes time, emergency funds should not be invested.

       “Investments will come with a set amount of risk. To minimise this risk, investors should take time to research and plan before making their trade. Investors should also be wary of stock picks provided by unlicensed individuals as they may not have credibility nor proof for their claims.

       “We introduced our Equity Sales division last year, a marketplace where licensed and experienced analysts provide trading ideas, insights and intelligence to support the growing number of digital retail investors. It has been very well received thus far.”

       Notably, the US market is a more volatile market compared to the local bourse due to the sheer size of market participants there. And while the S&P 500 has doubled since the start of the pandemic, the prospect of monetary tightening weighs on stock valuations.

       According to Rakuten head of research Kenny Yee, the tapering and rate hike by the Federal Reserve should reduce overall liquidity from the equity markets. As a result, valuation premiums should narrow, especially for technology stocks which have been trading at exorbitant ratios.

       In view of this, the brokerage expects global market volatility to increase as sentiments have turned cautious with diminishing risk appetites. That said, Mise pointed out that portfolio diversification across markets will help retail investors to navigate market volatility.

       “When your stocks are spread over several sectors and markets, and a particular sector or market is not performing well, only some of your stocks will be impacted, minimising your risk of loss,” he said.