Investors across Asia are increasingly attracted to US equities. Apple, Tesla, Nvidia, and Amazon represent more than simple businesses. They're brands that are listed. Owning them feels like participating in something larger than just a business.
That feeling is real. So are the practical problems.
Time zones are the biggest challenge for Asian investors. https://www.fxcm-markets.com/shares/ The New York Stock Exchange opens at 9:30am New York Time. That's 10:30pm for Malaysian investors. Traders in Malaysia either become night owls or adapt their routines. While pre-market and after-hours trading are available, liquidity is much thinner. Price gaps can occur when the main session opens.
Conversion costs add up. Buying US stocks requires converting ringgit into US dollars. There's a spread on every trade. All dividends are in USD. Converting profits back into MYR adds another fee. It’s manageable, but it should be factored into return calculations.
Dividend tax is a surprise for many Asian investors. A 30% withholding tax applies to dividends paid to non-US investors, but can be lower under tax treaties. Investors in Malaysia should review their tax situation and factor this into dividend yield calculations.
US stocks can behave dramatically during earnings season. Stocks can move 10% to 20% based on quarterly results. A company may beat earnings but offer weak guidance and still see its stock drop. Logic often takes a back seat during earnings week.
Fractional shares have opened the door for more investors. In the past, high share prices meant large investments to buy a single share. Fractional investing allows smaller investors to invest in companies they would otherwise not be able to.
Sectors are more important than stock selection. US indices have heavy exposure to technology, creating risks that many investors overlook. Diversifying into sectors like healthcare, consumer staples, financials, and energy helps stabilize a portfolio.
Value investing faces challenges in US markets. Price-to-earnings multiples are outrageous by other market standards. Growth expectations are built into valuations. When companies fall short, even marginally, price drops can be harsh.
Investing in quality US businesses and compounding returns has worked well historically. Short-term trading in those markets has wiped out wealth just as surely.