Sunday, April 12, 2020

Why we should invest into US markets?

As announced, the MCO will be extended to 28 April 2020 is to fight COVID-19
Since our MCO is extended for another 14 days on Phase 3, I tidy one of my drawer and saw my ex company share statement. This is my first time bought into the foreign shares.
In 2015, first time I venture out from my semiconductor industry and joined a green field newly setup company, Abbott Manufacturing Kulim. Abbott Manufacturing Malaysia gave me chance to own their share through ESPP (Employee Stock Purchase Plan).
29 Jul 2016 is the date of acquisition of the shares at USD 44.81 per share. Today Abbott Price is at USD USD 86.04. Refer to below the Price chart from Yahoo finance.

Still recalled my previous article sharing that one Abbott secretary who amassed a $7,000,000 fortune for charity by the time she passed away? If not, you can read from here.
During these past 2 weeks MCO, my another group chat is also discussion we should invest into US stock now. Extracted some of the text exchange as below:
Why we should invest into US markets?
Is natural that we Malaysian invest into KLSE locally and not foreign markets. We might think that investing in foreign markets could be risky.

a) Global Companies
A lot of worldwide companies that we known dailies is listed in USA stock market, for instance, VISA, Master, Starbuck, Pepsi, Coca Cola, Microsoft, Facebook, Google, Johnson & Johnson, Disney, Netflix etc. These are not available in local markets and we can buy a share to own them.

b) Most online  material
All of the above companies mentioned on section (a), a lot of research material are widely available online. Any research information need on the companies are easily available within seconds.

c) Huge market capitalization
In US market, closed to 200 billion traded daily. Just give a perspective on how big is their market compare to KLSE.
For KLSE, if all the listed 1000 plus companies added up their capital, it will sum up at around MYR 1.379 billion (~USD 322 billion) as of 31-March-2020.

Microsoft                 ~ USD 1,260 billion as of 12 April 2020
Google                    ~ USD   830 billion as of 12 April 2020
Facebook                ~ USD   499 billion as of 12 April 2020
Johnson & Johnson ~ USD 372 billion as of 12 April 2020
Visa                         ~ USD 373 billion as of 12 April 2020
Master Card            ~ USD 267 billion as of 12 April 2020
Coca cola                ~ USD   210 billion as of 12 April 2020
Pepsi                       ~ USD   185 billion as of 12 April 2020

Comparing our local market capitalization to just one companies like Facebook, Google and Microsoft, already far exceed to our total local capitalization. That is how big the US market.

d) Market Performance
Chart below can be self explainable on the market performance from 2010 till 2019 (10 years)
US market yearly return range from 18.1% - 35.7% whilst our local yearly return is about 2.4%

e) Currency devaluation
If we invest into US and should change our MYR to USD. Past 10 years the MYR has weaken yearly about 4%, whilst for SGD, is weaken about 2.5% ever year, refer to both chart below. 

The currency effect also makes it possible to make money if your stock did not perform well. The stronger the USD, it will be another booster to increased your investment return. Always remember that whenever you buy shares of a foreign stock, you’re actually making two investment decisions. You’re betting on both the performance of the company and the currency itself. The ideal scenario is being right about both: the stock price goes up, and you get an extra benefit from a strengthening of the currency. The worst-case: the stock goes down, and the currency loses value relative to the dollar. 

Based on the above five factors and with my initial investment to the Abbott Laboratries, it exhibit and proof that it was a right decision 4 years ago. Now will look into more in depth of US market.



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