Opportunities in the US Stock Markets
PETALING JAYA: As inflation fears have eased, the stock market, especially in the United States, presents a buying opportunity thanks to an economic rebound and more fiscal stimulus after Covid-19.
Over the past year, the Nasdaq index has jumped over 40% while the S&P 500 has jumped over 38%.
Penjana Kapital Sdn Bhd, Chief Investment Officer, Taufiq Iskandar, said investors should consider investing in US stock markets as part of their portfolio diversification and participating in new economic sectors such as technology and health.
He pointed out that the near zero interest rate in the United States has fueled the stock markets, pushing the markets to a price-earnings ratio (PE) of 30 times.
While some have suggested that the US stock markets trade at high valuations and with higher volatility, investors would do well to observe megatrends and watch the US Federal Reserve’s monetary policies when making decisions about the market. investment in the United States.
“A lot of people are talking about the insane valuation of the US stock markets. Indeed, if you look at a historical average adjusted PE for the US markets it is around 16 to 19 times, but this happened when interest rates were between 4% and 6% in the 1990s. until the early 2000s.
“But now the interest rates are close to zero, so if you ask me if 30 times is expensive, you will have to assess it again. I think there is an opportunity to invest,” he said. he said at the launch of MIDF’s online investment platform Amanah Investment Bank Bhd, MIDF Invest.
MIDF Invest allows Malaysian clients to trade US stocks and exchange traded funds on the New York Stock Exchange and Nasdaq.
Beyond Insights founder Kathlyn Toh suggested investors look at megatrends such as the rollout of 5G, which is still in its early stages.
She pointed out that while the valuation of many technology sectors seemed high, investors should be selective in their stock selection.
“For new investors, I suggest they look to companies with stable earnings rather than emerging stocks,” she said at the virtual launch.
She also suggested investors watch US Fed meetings, especially on its bond buying program which could affect money supply in the market.
“When you have a plentiful supply of money, it has to flow into assets. When the money supply decreases, some of that money has to be withdrawn.
“But I don’t think the Fed is going to rush into this and do it very gradually,” she said, adding that the next Federal Open Market Committee meeting would see some volatility in the market and investors should. look beyond that. .
MIDF Group Managing Director Datuk Charon Wardini Mokhzani (file photo) said the launch of the MIDF Invest online trading platform was part of a growing interest in investing in other markets, especially the US stock markets.
“In recent years, Malaysian investors, both fund managers and individuals, have become more sophisticated and knowledgeable.
“We have seen a growing interest in investing in other markets, particularly the United States.
“This is driven by the need to diversify one’s portfolio as well as the attractiveness of high returns from US markets, driven in part by the performance of technology companies,” he said.
MIDF Invest is in partnership with Saxo Markets Asia Pacific, a subsidiary of Saxo Bank based in Denmark.