Last updated June 26th, 2021.
There are lots of different ways to invest in Asian markets. From buying real estate or stocks, to starting your own business, the sheer number international investment options might leave some people confused.
With that said, buying stocks is still the first method most people consider when it comes to investing in Asia. Nearly anyone in the world can trade stocks in Asia online, from home, and with little effort.
Practically every online brokerage will let you buy stocks listed on major global exchanges, including those in Asia.
And you should probably switch brokerage firms if yours doesn’t allow trading on the world’s most populous continent.
Stock markets such as Shanghai’s and Singapore’s are mainstays of any brokerage that’s worth using. A good broker should let you trade stock across multiple countries in Asia – regardless of where their headquarters is based.
Secondary Listings and ADRs? Not Always an Option
Companies in Asia often have secondary listings outside their home market. Secondary listings are most common in New York and London.
Giving just two examples, Baidu is listed on the NASDAQ whereas Toyota is listed on the NYSE through American Depository Receipts (ADRs).
Many ADRs are low-volume compared to the main listing in their home market though, and are sometimes difficult to sell quickly or at a fair price.
It’s worth mentioning the United States has the highest concentration of listed stocks in Asia outside of the continent itself. Because of this, trading stocks in Asia through a U.S. brokerage account is a popular option for investors based in North America.
A table showing Schwab’s international trading fees. Is your transaction size big enough where $50 commissions don’t affect overall returns? Because that’s the reality of buying stocks in Asia through a broker outside of the region.
Trading Stocks in Asia with an Offshore Broker
However, using your American or European account to buy and sell stocks in Asia isn’t an ideal method of investment at all.
Why shouldn’t you trade with your normal broker? For starters, you’re giving up key competitive advantages. It takes away many of the perks that come from investing offshore in the first place.
By the very nature of trading stocks that are listed in New York or London, you’re now competing 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 out of a market when your competitors are performing in-depth analysis and executing trades in under a second?
Very rarely, some retail investors consistently outperform the market. But a hedge fund will usually get to any true, mathematically-proven “value stocks” while an individual investor waits for Google Finance to load.
This reason is also why I prefer smaller exchanges including Malaysia’s and Vietnam’s. Countries such as these have hundreds of hidden gems with almost no analyst coverage.
If you’re solely trading in markets where everyone else is buying up assets, it might be worth allocating your portfolio differently.
Of course, the online brokerage you’re already using may let you trade in Japan or China. Yet they almost certainly won’t let you buy stocks in Vietnam or Malaysia. You’ll probably need to open a brokerage account in Asia to access the more exotic, emerging and frontier markets.
In short, you’re severely limiting 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, it typically means higher fees alongside less liquidity.
More Options, Higher Returns, and Lower Fees
Maintaining your ability to find hidden gems in frontier markets such as Indonesia and the Philippines isn’t the only reason to open a brokerage account in Asia though.
You’ll also save yourself a lot of money in fees through setting up a local account in the region. Brokerage firms often charge extremely high commissions on international stock trades.
For example, Fidelity (a major broker in the U.S.) charges HK$250 to buy or sell a stock in Hong Kong – a whopping US$32 per trade. A local account such as Boom Securities charges HK$88, or just US$12 per trade by comparison.
Trading stocks in Asia is similar to anywhere else in the world once you’ve opened your brokerage account. I won’t get into details 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 as with most things in life, your end result depends on how much effort you’re willing to put in.
The best way to buy stocks across Asia is to open a local brokerage account in a regional finance hub like Singapore or Hong Kong and invest directly.
Don’t merely trade shares of Sony, Alibaba or other “easily purchased” assets on western exchanges.
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