Trading on Asian Stock Exchanges: Advantages and Disadvantages

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One of the ways to invest our savings comes from afar, particularly from the Asian markets. It is an original way of accessing equities, fundamentally if the channels of the national markets have been exhausted, including those of other neighboring countries. In spite of everything, it will not be an easy operation to carry out. Of course not, and in any case presents many lights and shadows You should know if you are tempted to take positions on any of your stock indices, any of them.

When we talk about the Asian stock market, we are not referring to a single market, far from it. Rather, it provides a plurality above other geographic spaces. Not surprisingly, you can invest part of your assets in clearly consolidated countries, such as Japan. Or opt for some of the emerging ones: South Korea, Malaysia, Singapore, etc.. Sin olvidar, desde luego, China, por sus especiales características. Una oferta importante, en definitiva, a la que vas a poder tener acceso nada más establecer una correcta strategy de inversión.

If in summary you opt for some of your main stock indices in Asia, you must understand that the return you can get from your savings is very important, and may even be higher than on traditional trading floors. The reason is due to the high volatility in which its shares are generally traded. With strong oscillations between its maximum and minimum prices. But for the same reason you should be very cautious in your movements, since it is not impossible that you can lose a good part of the invested savings.

One can only remember how the Chinese stock market developed during the last two quarters of 2015. With falls in the shares of Asian companies of up to almost 20%, even more so in the most vulnerable populations. Even though also with recoveries in their equally striking prices for their special virulence. With a latent risk in the operations that you are going to carry out from now on, at least in those that refer to the Chinese stock market in particular.

Characteristics of Asian exchanges

Undoubtedly, the first thing you should contribute is a minimum knowledge of what it really means to invest in one of these stock exchanges so far from your natural environment. Not surprisingly, it will not be the same as in the Westerners, in which you were moving until now. A first factor of distortion comes from their schedules.. They are listed while you are resting at night, and it is very difficult to regularly monitor the evolution of any of these markets: Chinese, Korean, Japanese… Therefore, it will be a much more complex task, and one that you were not used to doing.

Another scenario through which its stock market activity develops has little to do with the economic approaches by which Western stock markets are governed, fundamentally those of the old continent. And that will possibly prevent you from delving into your stock markets. Despite everything, they move under similar events.: interest rates, inflation, economic growth or unemployment. Even when applied to another economic field, and also geographical, as in this case the Asian one.

From this very particular situation presented by the Asian stock markets, and in even complex cases, It is not strange that you have some other problem taking positions. in any of its equity markets, any of them and without exclusions. And that only through caution and protection of your rights will you be able to satisfactorily arrange your personal interests. First of all, you must not forget that you are dealing with financial markets that are new to you. And as a result of this, you must act under other strategies and guidelines different from the ones you lived until now.

Higher commissions

Its operations will entail more expenses in the purchase and sale operations carried out in Asian markets, in connection with those that are being developed in national parks, including those of the old continent. Your rates will possibly be more expansive, which can reach twice those requested to operate on the Spanish Stock Exchange, regardless of the bank or financial intermediary where you have your investment portfolio open. The expenses as a result of this will increase in all cases.

This factor can cancel out part of the profitability obtained in operations carried out outside our borders. A sanction that you must assess to see if it is really worth opting for other alternative markets outside of your cultural and financial environment. From this approach, you should only go to them before two duly defined scenarios. First, when business opportunities have been exhausted on the Spanish Stock Exchange, and by extension in the European. Something totally understandable and admissible.

And on another stage when any of the Asian stock markets show a clear uptrend, y hacerte variar la estrategia de inversión que tenías hasta ahora. Solo así estarás en una posición mucho más favorable para alcanzar los objetivos marcados. Y que no son otros que rentabilizar los ahorros. Cuanto más mejor. No es de extrañar que be he target principal de cualquier inversor.

How should you invest in these markets?

Taking positions in their markets must materialize as long as minimum requirements are met. And that will affect both your strategy and the economic contributions that purchase orders present. So that in summary they determine if you have made a good or bad financial operation.

• As a complement to your equity operations in the so-called traditional markets. Con aportes económicos que estén en líneas proporcionales a estos, y que puedan configurar el briefcase de inversiones escogido por usted.
• At the precise moments when open possibilities to access these markets with greater guarantees, and that they will only appear in very specific situations and under trends favorable to the interests of retail savers.
• In all situations you should never invest all your savings, but on the contrary, a minimal part of them. And that it would not represent more than 20% of the capital stock available for this type of investment, as a formula to protect capital.
• Selecting, not only the values sensitive to your demand in this geographical area, but fundamentally to the stock markets most favorable to your interests, and that can come from any stock index, and from the different exchanges that operate in Asia.
• Knowing at all times where you are going to save, con una mínima compresión del valor que será objeto de la demanda de inversión, inclusive asesorado por los profesionales que dispones en el banco donde eres client. Sin costo alguno por este servicio.

Disadvantages of these stock markets

Whatever the case, it will be very important that you assess all the inconveniences that taking positions in the financial markets of this geographical area so far from its natural environment will entail. It will be the most effective method of protecting your positions, and preventing part of the monetary contributions from evaporating in the operations that you are going to carry out from now on. And among which the following drawbacks would stand out.

They are not suitable markets for all investor profiles., but only for the experienced ones who have at some point invested their savings in Asian parks. It is not surprising that there are many interests at stake.

The control of operations will be carried out with greater difficulty, not only because of its hours, but also because of the special characteristics of its markets. And that they will require a greater knowledge of them so as not to make excessive mistakes in investment strategies.

With complete certainty that many of his proposals will be practically unknown, and even without knowing its business lines, business results, revaluation potential and even its evolution on the stock market in recent years.

It is not fully proven that you can achieve a higher return than other equity markets, not even develop on positive ground. Prudence being the best vaccine to generate handicaps that we can regret after a few days of opening positions in their markets.

Based on this scenario presented by the Asian stock markets, it will not be very difficult to lean towards a specific initiative. The offer is very wide, and from all sectors, and where that linked to new technologies is increasing as a result of the constant presence of companies with these lines of business. Mainly in Chinese and Japanese soils, which may be more sensitive to this demand of yours.

Another aspect that you should consider is the currency exchange at the time of formalizing the operation, and that it will require an additional expense as a result of the formalization of this banking procedure. Through a small commission that the bank with which you frequently operate will charge you. Not surprisingly, many of these currencies are not very common in the stock markets, not even for you.

If, despite everything, you are still determined to resort to this area of the planet to develop investments, arm yourself with patience, because the volatility in the price of its shares will make you delay the resolution of the movements. And till you cannot close the positions in the initially desired timeframes. From this point of view, you will be facing operations with greater difficulty, mainly if they are directed to the short term. Risk will be a new factor that you should have from now on, even more than in the markets that surround you.