TOKYO (June 27): When the coronavirus (Covid-19) pandemic sent shares plunging, you didn’t have to be a professional investor to spot a buying opportunity. In fact, it might be better if you weren’t.

The can’t-miss rise of equity markets around Asia is fuelling the explosion of interest among retail investors in the region, mirroring their exuberance worldwide. Millions of investors who had never so much as opened a trading account before have been piling into the market.

Just as the pandemic led bored Americans to make the Robinhood investing app a household name, it’s the amateurs who have helped to lift equities from India to Thailand despite some of the worst macroeconomic fundamentals in memory. But it’s also giving professionals pause - what happens when these investors are no longer around?

“If everyone is going into the same name and something happens, those names are likely to be sold off quite aggressively,” said Catherine Yeung, Fidelity International’s investment director. “I think we just need to be wary that market seems a bit complacent at the moment.”

In Japan, the Tokyo Stock Exchange Mothers Index, which hosts many tech start-up listings, has soared throughout the pandemic: buying the dip on almost any small-cap stock would make money. All but seven of the 320 companies on the board have gained since April’s start, from vaccine hopeful Agnes Inc, up 235%, to Precision System Science Co, which is developing a virus test and has added more than 480%.

“If there’s a report on TV about a coronavirus-related stock that’s going up, they can just buy it the next day and make profit,” said Naoki Murakami, a long-time Japanese day-trader. He points to “simple” bets by amateur investors on stocks such as AnGes or Avigan maker Fujifilm Holdings Corp.

n the US, Robinhood and the Reddit forum called r/wallstreetbets have become a dominant force in the market, boosting everything from the stocks of bankrupt companies such as Hertz Global Holdings Inc to revenue-less start-ups like truck maker Nikola Corp. That pattern has been repeated in Europe with brokerages in Germany, the UK and France all reporting a jump in participation by individual investors, fueled by a fear of missing out.

And while the names may be less familiar, the same picture appears across countries in Asia that imposed lockdowns.

Digital habits

Retail investors supported Singapore’s exit from bear market territory. Dividends in the city state are a draw, “and they are sitting at home, they have nothing to do,” said Aik Hong Ng, deputy head of Phillip Investor Centre, a unit of Phillip Securities Pte Ltd. Some are loading up on debt and leverage to buy more shares.

“Almost-global shelter-in-place measures are entrenching digital habits across all aspects of daily life. This includes digitising our investment behavior,” said Clarie Kwa, chief market officer for wealth management advisory firm 360F in Singapore. “Without the normal distractions of life, people actually stop procrastinating and open their first retail accounts, motivated further by their fear of missing a chance to buy low.”

In the Philippines, AAA Southeast Equities Inc saw two to three times more new online brokerage accounts opened each month from March when the lockdown was imposed, said president William Matthew Cabango. Meanwhile, India has seen 1.8 million new accounts opened since March, while South Koreans are borrowing to fuel their purchases.

The amateur

As the first major economy to adopt the zero-interest rate policies and central bank asset purchases that are boosting equity valuations across the world, Japan’s experience may be the most informative.

Burned when the bubble collapsed, for years Japan’s retail investors have avoided stocks. Two decades of underperformance instilled habits that propelled investors to try to sell at the top. Yet that attitude could at last be shifting.

Japanese individuals opened more than 820,000 online brokerage accounts between February and April, more than double the number in the same period in 2019.

A 35-year-old Japanese housewife, who had long watched her husband and parents buy stocks and get gifts typical for shareholders, never before found the right time to start buying herself.

“I’m the amateur,” she said, declining to give her name citing privacy concerns. “But I saw a chance when shares plunged and I started buying.” She’s been documenting her experience on Twitter under the handle @kabukonosekai, buying the dips on large companies and planning to hold them long term.

In a regular survey this month of retail investors by Monex Group Inc, just 17% said the plunge led them to sell risk assets and move into cash, with 37% saying they took the opportunity to increase their share holdings.

Long-term return

Well, who wouldn’t be happy with their performance in the market that goes up regardless of bad news? The question turns to whether these investors will cut and run during the next dip, or learn new ways to succeed.

In China, interest has waned somewhat. A surge of account openings in March and April coincided with lockdowns throughout the country, but May figures were more muted. China has already had a considerable retail investor presence, with the lockdown stock boom paling in comparison to some recent share rallies.

In Japan, where retail investors are less of a force, individuals’ share of trading volume jumped during the state of emergency, and more surprisingly has stayed consistent even as workers have returned to the office.

“Oddly enough, many if not most of the retail investors take a long view,” said veteran investor Mark Mobius, co-founder of Mobius Capital Partners, “and they will probably keep their money in the market and think of a long term return.”

Calvin comments:

In year 1997/8 I sold off all shares after Aflred Ong warned me to sell & leave the market.

And he was correct. 

I started selling when KLSE was around 1,200 points then

By 1,050 points I already sold half.

Then one day I woke up & switched on the TV. I saw 6 counters related to Proton King Yahya suspended because his helicopter crashed!

I told my Remisier to sell off every last shares. By then KLSE dropped to 1,000 points

From there it crashed & crashed to the lowest 261 points!

In year 2009/2010 we visited USA for a holiday. We saw flyers everywhere on Huge Bins placed at many places

On closer look we took one and read

NEED TO BORROW MONEY?

Are you jobless? No problem

Is your house going to be repossessed? No problem

Are you insolvent? No problem

Are you a bankrupt? No problem

Are you blacklisted? No problem

WOW! WOW! WOW!

What is happening in Los Angeles, San Francisco, San Jose or Nevada?

EVERY WHERE GOT LEAF LETS & FLYERS SCREAMING OUT TO BORROW MONIES AS THOUGH THERE IS NO TOMORROW!

Scratching our heads in disbelief we left USA 

Then we KNOW. In year 2003 George Soros warned that there is a HUGE HOUSING BUBBLE IN USA Caused by Subprime lending

And by 2016/2017 THE BUBLE WILL BURST!

So we sold our shares again

Then 2007/8 Subprime Collapsed. Casualties were Lehman Brothers, Bear Stearns, Washington Mutual, Morgan Stanley & others

Thank God we escaped both 1997/8 & 2007/8 crashes!

NOW IS THIS ANOTHER GREAT CRASH TIME?

Should sell all and get out?

No. I don't think so

Why?

BECAUSE USA IS GOING INTO UNLIMITED QE (QUANTITATIVE EASING) OR MONEY PRINTING

SO THIS TIME WILL BE DIFFERENT

NOT DEFLATION FROM MARKET CRASHES

THEN?

THEN CAN EXPECT HYPER INFLATION AS THE DOLLAR BECOMES VALUELESS LIKE THE JAPANESE BANANA CURRENCY!!

NEXT ON THE USA AGENDA

TRUMP WILL BE PROPOSING A USA1 TRILLIONS (RM4.2 TRILLIONS) FOR INFRASTRUCTURE JOBS IN USA TO REPAIR ROADS, BRIDGES, HIGHWAYS, AIRPORTS, SHIPPING PORTS & OTHERS!

THAT IS WHY WHEN MARKET WEAKENS THEY WILL PRINT AND PUMP MORE MONEY INTO THE SYSTEM

IN TIMES OF DEFLATION CASH IS KING

BUT IN TIMES OF INFLATION CASH IS TRASH 

USA AT NEAR ZERO INTEREST RATE AND MALAYSIA AT 2% INTEREST RATE CANNOT COVER INFLATION

That is why WE ARE IN DIFFERENT SCENARIO NOW

BUT SEEK TO BUY THE CORRECT STOCKS

Best reagrds

Calvin Tan Research

Singapore