Retail investors dive into global stock market party

Long-term investors may still be licking their wounds as stocks recover from the vertiginous coronavirus slump earlier this year, but it provided an incredible buying opportunity and retail investors have piled into rebounding markets even as experts warn against believing it is a sure bet.

The number of people pumping a few thousand dollars into stocks has leapt since March in many countries across the world, especially since ultra-low interest rates mean that those who have saved some money have fewer attractive investment options.

In India, “we have seen a sharp 50% jump in first-time users investing in the markets since March,” financial consultant Aditya Joshi told Agence France-Presse (AFP).

“Many housewives with no prior experience too have started trading,” he noted.

The country’s economy has suffered a record slump meanwhile, with gross domestic product (GDP) plunging by almost 24% from one quarter to the next.

The Reserve Bank of India has taken note, and warned that the “disconnect between the two [realities] carries risks.

“Relatively buoyant global financial markets demonstrate not just a disconnect with underlying economic fundamentals, but also portend financial stability risks, particularly for Emerging Market Economies,” the bank noted in a report released last month.

Bursa Malaysia warned retail investors in August against chasing rumors and listening to unlicensed “investment celebrities” on social media. It reiterated traditional advice: study the fundamentals of a company before investing. 

In France, the financial markets watchdog AMF has recorded 700,000 new retail investors since November.

Online bank Boursorama told AFP that the number of people using its market trading platform had tripled, and the number of orders was 4 times higher.

New clients invest an average of 5,000 euros ($5,900), all of which resulted in 2020 being a “remarkable” year for the company.

Paris digital strategy consultant Alexandre, 25, is one such investor, and he checks his stocks twice a day.

Since March, the value of his 6,000-euro portfolio has gained about 15%, far more than he could make with a traditional savings account or government bonds.

“I am looking at exceptional numbers, I know that,” he said.

While declining to provide his last name, Alexandre was willing to reveal that he was betting on aircraft manufacturer Airbus, as well as Worldline and Ingenico, two firms involved with online payments. 

Alexandre said he is aware that “everything could collapse from one day to the next.”

Red all over

When the coronavirus pandemic really got rolling in March and governments locked down business activity worldwide, stock markets were awash in red.

But Google searches for stock market investment leapt in many countries as people who were stuck at home saw an opportunity to buy stocks that had plunged in value.

According to the Bloomberg news agency, retail investors now account for more than 20% of all trades in New York, compared with 15% in 2019.

Gabriel Contassot, a French designer who works there, began investing on March 17, a day after the Dow Jones Industrial Average suffered its biggest drop in 33 years.

“I considered this period a bit like the sales” he joked in reference to regulated times of the year when French stores are allowed to sell at a discount.

His $18,000-portfolio is comprised of pandemic “winners” such as Alibaba, Amazon, Tesla, and Zoom, and on paper he has made around $6,000.

Like many new retail investors in the United States, Contassot uses his mobile phone to buy and sell stocks via an app. In his case it is Robinhood, which charges no commission and is user friendly.

Big in Japan

In India, the popular apps are Zerodha or Paytm Money and they too have put many at a virtual trader’s desk.

The picture is similar in other parts of Asia too.

Companies listed in Singapore have been boosted by an influx of 9.6 billion Singapore dollars ($7 billion) from retail investors between January 1 and September 22, the local stock exchange said.

South Korea’s main market reports a net increase of $37.7 billion in purchases, compared with a net increase of $6.4 billion in sales one year earlier.

And in Japan, the number of retail trading accounts soared by 72% in late March compared with the same month in 2019, the Financial Services Agency said.

But it does not always end well.

“I had no notion of how to trade,” acknowledged Ayman Dassouli, a student in France who saw 3,000 euros go up in smoke on the eToro platform between June and August.

Many however have experienced the thrill of seeing the numbers climb steadily higher with only rare moments of doubt. And they hope the dance will go on.

“Honestly, I see lots of opportunity in this deadly coronavirus pandemic,” said Dennis Chong, a 47-year-old Malaysian retail investor who concluded: “It is party time.” – Rappler.com