When everyone is trying to make money in stocks

The number of people pumping a few thousand dollars into stocks has leapt since March.
The number of people pumping a few thousand dollars into stocks has leapt since March.PHOTO: REUTERS

Long-term investors may still be licking their wounds as stocks recover from the 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 it being 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 per cent jump in first-time users investing in the markets since March", financial consultant Aditya Joshi told 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 plunging by almost 24 per cent 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 recent report.

Bursa Malaysia warned retail investors against chasing rumours 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 last November.

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

New clients invest an average of €5,000 (S$8,000), 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 portfolio has gained about 15 per cent, 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 say he was betting on aircraft manufacturer Airbus, as well as Worldline and Ingenico, two firms involved with online payments.

He said he is aware that "everything could collapse from one day to the next".

Mr Gabriel Contassot, a French designer, said he 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 US$18,000 (S$24,500) portfolio comprises pandemic "winners" such as Alibaba, Amazon, Tesla and Zoom and on paper he has made around US$6,000, he said.

Like many new retail investors in the United States, Mr 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.

In India, the popular apps are Zerodha and Paytm Money and they too have put many people at a virtual trader's desk. The picture is similar in other parts of Asia.

Companies listed in Singapore have been boosted by an influx of $9.6 billion from retail investors between Jan 1 and Sept 22, the local stock exchange said.

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

And in Japan, the number of retail trading accounts soared by 72 per cent 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 Mr Ayman Dassouli, a student in France who saw €3,000 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 Mr Dennis Chong, a 47-year-old Malaysian retail investor. He concluded: "It is party time."

AGENCE FRANCE-PRESSE

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A version of this article appeared in the print edition of The Sunday Times on October 04, 2020, with the headline 'When everyone is trying to make money in stocks'. Print Edition | Subscribe