PETALING JAYA: As inflationary fears have eased, the stock market, especially in the United States, presents buying opportunity on the back of an economic rebound and more fiscal stimulus post-Covid-19.
Over the past year, the Nasdaq index has surged more than 40% while the S&P 500 has jumped by more than 38%.
Penjana Kapital Sdn Bhd chief investment officer Taufiq Iskandar said investors should consider investing in the US stock markets as part of portfolio diversification and to take part in new economic sectors such as technology and healthcare.
He pointed out that the near-zero interest rate in the United States has fuelled stock markets, pushing the markets to a 30-times price-earnings (PE) ratio.
While some have suggested that the US stock markets are trading at lofty valuations and with higher volatility, investors would do well to observe megatrends and monitor the US Federal Reserves’ monetary policies when making decisions on investing in the United States.
“A lot of people are talking about the crazy valuation in the US stock markets. This is because if you look at a historical average adjusted PE for the US markets, it is roughly about 16 to 19 times, but that took place when interest rates were between 4% and 6% in the 1990s up to early 2000s.
“But now interest rates are close to zero, so if you ask me if 30 times is expensive, you’ll need to evaluate it again. I think there is an opportunity to invest, ” he said at the launch of MIDF Amanah Investment Bank Bhd’s online investment platform, MIDF Invest.
MIDF Invest allows Malaysian customers to trade US stocks and exchange-traded funds on the New York Stock Exchange and Nasdaq.
Beyond Insights founder Kathlyn Toh suggested that investors look into megatrends such as the 5G deployment, which is still at the early stage.
She pointed out that while the valuation of many technology sectors appeared lofty, investors should be selective with their stock pickings.
“For new investors, I suggest they look into companies with stable earnings instead of emerging stocks, ” she said at the virtual launch.
She also suggested investors monitor the US Fed’s meetings, especially on its bond-buying programme which could affect money supply in the market.
“When you have ample money supply, it has to flow into assets. When the money supply shrinks, then some of this money needs to be taken out.
“But I don’t think the Fed is going to be hasty about that and will be doing 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 pic) said the launch of the MIDF Invest online trading platform came on the back of growing interest in investing in other markets, particularly 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 attractions of the high returns of the 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 Denmark-based Saxo Bank.
(Web source: https://www.thestar.com.my/business/business-news/2021/07/07/opportunities-in-us-stock-markets)