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In my previous article, When is the Best Time to Invest? where I discussed when is the best time to invest, I made it clear that buying fear and selling greed does not apply all the time.

The $PSEi has enjoyed a long run bull run from 2008 bottom-up until middle of 2013 posting a +300% from the bottom. But still hasn’t changed the trend from 2013 to 2018 and just resulted in multiple pullbacks.

The country pre-Covid19 was one of the top producers of millionaires. These are not just peso millionaires but in dollars as well. With an economic boom of the rich getting richer, money flows from one place to another. Thus producing more millionaires along the way and this growth is attributed as well to stock market gains.

One of the most popular brands and stocks, Jollibee ($JFC) gained more than +800% from the bottom of the 2008 crash till its peak in the middle of 2018. A capital of Php100,000 invested in this stock would have become Php900,000 in just 10 years if one sold in the middle of the 2018 peak.

As posted in the previous article, in a bull market when everyone is earning and everyone feels like a genius including myself, you will hear a lot of success stories made from the surge in stock prices. There have been many successful IPOs (initial public offerings) such as Wilcon ($WLCON) trading from Php5 now at php15.28 as of the posting of this article. That resulted in 200% gain.

But it’s not Christmas every day. There are also recent IPOs that did not materialize positively. Such as Axelum ($AXLM) from its IPO price of Php5 is now trading Php2.75 as of this posting which resulted in -41% loss. Another example would be $DMW, a property company with an IPO at around Php12 to now trading Php6.50 as of this posting. That resulted in a -50% loss in value.

Most IPOs come from a bullish stance. When a company wants to list in a stock exchange, they either want/need to get more funding or pay the debt. They are bullish that the public will buy shares of their company. We had 22 IPOs on record from 2013-2017 and based on their first trading day out of the 22 stocks on average it returned 14.3% on the 1st trading day. There are 17 issues up including Wilcon which was mentioned in this article.

One of the IPOs in the table mentioned was $CHP or Cemex Holding Philippines. A cement company that decided to go public due to the BuildBuildbuild (BBBx3) program of the administration anticipating that demand for cement will be high.

On its first trading day, it reported a 3.3% gain. It was trading around Php11 in 2017. But as of this posting, it’s trading close to Php1. From its IPO price to the current trading price it has now resulted in more than -90% loss. Imagine being a director and shareholder of a company you helped build, but your investment in terms of paper value has already lost -90% if you held since the stock went public.

There are more cases like this, for this example, a big name like SHELL ($SHLPH)

Not all stocks go to heaven. Cheap stocks can get cheaper and at the same time expensive stocks can get more expensive regardless if indicators are showing signs of weakness and/or overbought level. See $MAC and $HOUSE charts above.

In conclusion, risk management is the name of the game. Whether in stocks or other assets like real estate, commodities, paintings, cryptocurrencies, etc. It is important that you must know when to exit your investment or trade when it goes against your initial bias.

You need to understand the risk you’re taking relative to the potential reward. Do your own research so you can make INFORMED decisions. It’s not Christmas every day and nothing is permanent. This current Covid-19 crisis has wiped out a lot of wealth globally. The only thing we can control are our emotions and risk.

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Contributor:

Name: R. Cruise
Investagrams Username: @limitlessinvestor

Channels:
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www.facebook.com/imlimitlessInvestor
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https://t.me/limitlesstraders
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www.youtube.com/channel/UCTAuxhwjliCGHBsPNQx32Xw

About the Contributor:

Limitless Investor / R Cruise – Elliottician, private fund manager, and cryptocurrency liquidity provider. Trading for 6 years already but considered a true trader for the previous 3.5 years only as he believes that a true trader must have gone through and traded a bear market. Whether in the long or short side is profitable. Specialty in reversal trades, psychology combined with Elliott Waves and fundamentals.

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This article is a continuation of the Going Global article series. If you haven’t read the first article, check it out here: Going Global: How do I Start Trading Internationally?

Now that we’ve gone around the globe and taken a look at some of the most prominent stock markets, it’s time to delve deeper into the US markets. Typically, many Filipino investors looking to diversify their portfolio begin with the US stock markets as these are the most reliable and accessible from here. We’ve already gone over the two main exchanges, the New York Stock Exchange and NASDAQ, in the last article, but here, let’s go even deeper into these exchanges and the indexes that guide them, in order to truly understand their complexities. Additionally, we will take a look at the Dow Jones Industrial Average, another important index in the US markets.

The New York Stock Exchange

The NYSE is the largest stock exchange in the world. Dating back to 1972 and with over 1,900 companies listed, it’s no surprise that it’s a hallmark in the world of investing. For a company to be listed in the NYSE, it must have at least 400 shareholders each owning more than 100 shares of stock, at least $1.1M shares of publicly traded stock, a market value of at least $40M, and it’s Initial Public Listing (IPO) must have a market value of at least $100M. Additionally, it must meet basic earning standards, which is either a pre-tax income of $10M or $200M in global market capitalization. As the exchange also houses international companies, these companies must meet the additional standards of having at least 2.5M shares outstanding and 5,000 public shareholders. With that long and exhaustive list of requirements, the quality of every company is assured. Another benefit of the NYSE is its global diversification, with stock listings from around the globe, including countries like Canada, China, and the UK.

To track the performance of its stocks, the exchange uses the NYSE Composite Index. It measures all stocks that are exclusively listed on the NYSE. The weights of the index are calculated based on the company’s market capitalization – the total market value of its stocks – while the index itself is calculated on the basis of price return and total return. The NYSE Composite Index is maintained by the S&P Dow Jones Indexes, a resource that tracks many other indexes and data regarding financial markets.

NASDAQ

Short for National Association of Securities Dealers Automated Quotations, it is the second-largest stock exchange after the NYSE in the world. It’s known for being dominated by technology giants such as Apple, Microsoft, IBM, and Facebook. However, the NASDAQ also lists a number of other influential companies in the fields of finance, energy, transportation, and healthcare. It’s listing requirements include having a shareholder’s equity of at least $2M, at least 100,000 public shares, a minimum of 300 shareholders, total assets worth $4M, a minimum of $3 per stock price, and public market value of at least $1M. As with the NYSE, this exhaustive list of requirements ensures the utmost quality of each company listed.

The NASDAQ-100 is the index used to track its stocks. Unlike the NYSE Composite Index, it tracks the price movement of only the top 100 largest stocks listed in NASDAQ. Additionally, it does not include financial institutions listed. It utilizes a weighting system to calculate the index, which limits the influence of large firms’ indexes by taking into account overbearing market capitalizations. This allows for a more accurate representation of the exchange. The index price is also calculated during pre and post-market hours, with market hours being from 9:30 AM – 4:00 PM (EST).

Dow Jones Industrial Average (DJIA)

The DJIA is an index in itself which is not tied to any specific stock exchange. It differs from the NYSE Composite Index and NASDAQ-100 because it is composed of 30 major companies that are leaders in their industry regardless of the exchange they are listed on. This index is run by the Wall Street Journal, whose editors make decisions about what companies make the cut. The DJIA only includes US-based companies that are traded either on the NYSE or NASDAQ. The purpose of the DJIA is to give an accurate and succinct overarching view of the US market – no trading goes through it, as trading only goes through the NYSE or NASDAQ. This index is widely viewed as the top representation of how the market is doing, with many top news channels and platforms displaying its calculations on a daily basis.

Standard & Poor’s 500 Index (S&P 500)

The Standard & Poor’s 500 Index, or commonly referred to as the S&P 500, is an index based on the market capitalization of the 500 largest publicly-traded companies in the US. This index is known to be the best basis or gauge of large-cap US equities. Investors use this as the benchmark for the overall market.

Why should I know all this?

If you’ve got this far thinking, “Well, this is all great to know, but how will this help me in my investing journey at all?” then that is totally understandable. Knowing what the stock exchanges are and the indexes that calculate their value may not seem that important, but having a good grasp of all this will also help you make wiser decisions when it comes to your investing practices. It’s much better when you are able to identify and understand the terminology used when referring to the different stock exchanges and their indexes, as well as the all-important difference between the DJIA and other stock indexes. This information is important as a first stepping stone into the US markets, with more exploration and discovery to come once you truly partake in the markets, because, as the saying goes, “Experience is the best teacher.”

The Going Global series aims to introduce traders, whether beginners or advanced, to the international stock markets. Throughout this series, we will explore the pros and cons of international investing, how to kickstart your international portfolio, and many more tips to navigate this more complex trading world.

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So you’ve been trading in the Philippine market for a while now, and feel like it’s time to start diversifying your trade portfolio.

You think to start trading in international markets — it’s a good opportunity, and it doesn’t seem too difficult!

However, the more you think about it, the more you realize how little you know about how it works — what exchanges should you be looking at? What are the most stable? How do I start trading? With all these questions swirling in your mind, it’s easy to get daunted and never really begin your venture into international markets. You realize that you may need a little guidance when it comes to entering those markets — well, look no further! This article takes you into the world of international trading, and watch out for more from the Going Global series to fully understand these foreign markets.

Get ready to kickstart your journey and start taking your stocks globally.

International Stock Exchanges

Almost every developed country has its own stock exchange: the Philippines has the PSE, China the Shanghai Stock Exchange, and many more. Each stock exchange is composed of companies that are locally listed and traded on the exchange. Among the most prominent stock exchanges in the world are the New York Stock Exchange, the NASDAQ, Tokyo Stock Exchange, and London Stock Exchange. Let’s take a closer look at each below:

1. New York Stock Exchange

The NYSE is the largest exchange in terms of total market capitalization. It dates back to 1972, and most of the largest American companies are listed here. It used the NYSE Composite Index to monitor stock activity. Additionally, foreign-owned companies may also list their shares on the NYSE, as long as they adhere to some specified listing standards.

2. NASDAQ

Short for National Association of Securities Dealers Automated Quotations, NASDAQ is the exchange for many electronic companies such as Apple, Microsoft, and Amazon. It is headquartered in New York City and was the first stock market in the United States to trade online in 1971.

3. Tokyo Stock Exchange

The Tokyo Stock Exchange is the most prominent of Japan’s five stock exchanges. It uses the Nikkei 225 Stock Average, a price-weighted index composed of Japan’s top 225 blue-chip companies. These companies are selected by the Nihon Keizai Shimbun, Japan’s leading business newspaper.

4. London Stock Exchange

The London Stock Exchange was founded in 1801. It utilizes the Financial Times Stock Exchange 100 Index, nicknamed the “Footsie”, which lists the top 100 companies in the London Stock Exchange with the highest market capitalization.

Why should I invest internationally?

Individuals usually invest internationally for two main reasons — to diversify their investment portfolio and take advantage of the growth of other countries. It is often wise to spread the risk of one’s investments across many companies and markets, as to not be overly reliant on the market conditions of just one area. As such, by diversifying one’s portfolio, one will be able to mitigate risks posed by economic, political, and social events of a country. Additionally, buying stocks in another country is a great way to take advantage of the growth they are experiencing. If a specific country is seeing great growth, investing in companies listed there will allow one to partake in their advancements.

However, there are also some risks that come with investing in foreign markets. Firstly, in order to invest internationally, you must work with a registered broker, as compared to being able to do so on your own in Philippine markets. This incurs additional costs, as you will have to pay commission fees. The fluctuating currency rates may also affect your investment positively or negatively, depending on whether the rate is going up or down. The currency rate will directly affect how much profit you are able to gain from your investment, which can go both ways. Lastly, there is the risk of having an inadequate understanding of political, economic, and social conditions in the country you are investing in, which will affect stock prices. Being hundreds or thousands of miles away from where you are investing your money makes it difficult to have a firm understanding of its market conditions, possibly leading to less informed decisions regarding your investments.

US Stocks vs Philippines Stocks since the market crashed

Just to show the difference between the US stock market and the Philippine stock market after the market crash we’ll be showing you guys the vast difference of opportunities on both markets. After the initial recovery, there were a few weeks where some stocks in the Philippines showed strong reversals like $MAXS, $IDC, $MAH, $JFC, $URC, $AC, $MRSGI, $PGOLD, and the like. However, only a few names went on to go up 30% or more. The stocks that made a strong move after the low at 4,000 levels are probably only a handful, and very rarely does everyone have the opportunity to capitalize on them.

However, while all the Philippine market had been reversals, the US stock market had hundreds of stocks close to making a new 52wk high and all-time high. A new breed of market leaders were already showing up in the global markets, while only a few stocks remained resilient and did not make news lows during the crash here in the Philippines; specifically, $GLO and $TEL.

Stocks in the US like $ZM, $SE, $WIX, $DOCU, $SHOP, $SGEN, $PYPL, $OKTA, $NFLX, $MASI, and so much more went on to make new highs. Here’s a look at a few of their charts as of May 26, 2020.

   

Conclusion

With all this being said, investing in foreign markets is still a good and profitable way to diversify your portfolio. It is recommended that 5-10% of your portfolio be foreign investments, with the majority still being from locally-listed companies. Before venturing into the international markets, it is best to be well-informed of the benefits and risks of doing so and to start investing confidently in your knowledge of foreign markets and its implications to your investment portfolio.

Watch out for more from the #GoingGlobal series of articles to further enhance your understanding of investing in foreign markets!

The Going Global series aims to introduce traders, whether beginners or advanced, to the international stock markets. Throughout this series, we will explore the pros and cons of international investing, how to kickstart your international portfolio, and many more tips to navigate this more complex trading world.

Trading both the Global Markets and the PSE is not an easy task. It will be difficult at first, but you will get a hang of it. As traders, it is our mission to look for strength and uptrends outside our local market, once the opportunities, based on your grade A setup, run out in the PSE.

Referring to the figures above, while the SPX was trending from 2019 to early 2020, PSEi was in a sideways movement. Certainly, I advocate the Bottom-Up Approach which I first learned from Mark Minervini in his book “Trade Like a Stock Market Wizard”, which simply means that a trader would focus on individual stocks first. Although, the opportunities in the US Market were far superior to that of the opportunities that sprung out of the $PSEi in the same period.

Did you have a hard time trading the PSE during 2019? I will be honest with you all, I started trading the PSEi in early 2019, and I found it difficult to trade. Fakeouts and shakeouts happened quite often. Although, there were a few names that were still making new highs while the PSEI was moving sideways such as $WLCON, $CPM, $SLI, and $HOUSE. Although, given that the US Markets contain approximately 7000 stocks (in the case of NYSE and NASDAQ), hundreds of stocks were making new highs, in comparison with the PSE.

That is why it is important to follow the opportunity present across markets. If you were to succumb to the PSE, chances are that you found it difficult to trade. Back in 2019, I was not prepared to venture out of the local market because I thought of it as my comfort zone. I found it daunting to explore other markets. I thought that being in the PSE is enough to suffice my goals as a trader.

In my personal experience, trading the global markets while trading the PSE was not easy at first. There will be several factors that you need to assess before you commit to trade across markets.

Are you eager to put in more work to achieve your trading goals?

Can you trade from 9:30am to 1:00pm (adjusted market hours until further notice) in the PSE, and trade from 9:30pm to 4:00am (due to time zone difference) in the US Stock Market? Other than that, can you also trade in between those times (given that Forex and Commodities are 24/5, and Cryptocurrency is 24/7)?

• This doesn’t mean that your eyes will be glued to your monitor 24/7. Before the market opens, one must PLAN THEIR TRADES so that you could set all your MARKET ORDERS.
• I put orders in advance so that I do not get left behind when the potential trade goes in my favor. I do this especially on 24-hour markets such as the Forex, Commodities, and Cryptocurrencies.

Are you willing to come out of your comfort zone (the Local Market)?

Willingness to learn:

• A New Platform.
• How trading with leverage works.
• How shorting works.

Accepting the risk involved in trading the Global Markets

• The US Market is prone to gap ups or gap downs during earnings season.
• Each asset class has a different DNA, wherein one may be more volatile than the other and driven by different fundamental factors.

The Global Markets will be a new environment that will require more effort in comparison to trading just the PSE. As Michael Jordan said, “You miss all the shots you don’t take.” It is such an overwhelming and eye-opening experience to trade across several markets. Indeed, continuous learning and building new experience is the key to navigate through our trading journey.

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Contributor:

Full Name: Miguel Lorenzo L. Cagampan
Investagrams Username: @Gagambatrader

Channels:
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www.facebook.com/gagambatraderph/

About the Contributor:

Gagambatrader is a personal brand that aims to provide value and content with regards to trading in the financial markets using Technical Analysis. Gagambatrader aims to influence and provide to the growing community of traders in the country.

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