There has been a never ending coverage of the increasing retail investor participation in the last year. Robinhood, meme stocks, r/wsb, the list goes on.
However, while these grabbed most of the news headlines, there was a bit of a storm brewing in Southeast Asia as well.
Retail participation has reached new heights in the region. Armed by reasons akin to the US, there has been a Cambrian explosion of retail investing in Southeast Asia.
But who and what have been driving this?
How much Netflix can one watch in a pandemic?
As with most things relating to the markets, don’t let “experts” fool you.
A core reason for why this explosion has taken place has been rather simple.
It has been well documented that sitting at home with not much to do during the pandemic has empowered investors to look to trading. This was no different for Southeast Asians, especially millennials.
Just as the pandemic led bored Americans to make the Robinhood app synonymous with retail investing, it’s the amateurs who have helped lift equities from Indonesia to Thailand despite some dire macroeconomic fundamentals and previous declines.
This was even true for countries that have seen retail investors stay away from the markets for decades. 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.
Going from never having opened an account, to piling millions into the market, retail investing in Asia went mainstream.
However, on top of just personal behaviour, there were a number of macroeconomic factors at play too.
Yields, Yields, Yields
Southeast Asia has high savings rates, with countries like Singapore in the top 10 of the world.
However, due to the extremely low interest rate environment, bank deposit rates have been decreasing constantly. In fact, they are pretty much at historic lows throughout the region. This has led retail investors to take to the markets.
UBS regularly tracks the difference between on and offshore gold prices in the region, which has shown that regional savings continue to shift from safe havens like gold to stocks.
In January 2021, the Indonesian Stock Exchange, IDX saw a record of 2 million transactions a day, as opposed to an average of 600,000 the year before. It had never crossed 1 million ever before in history.
Across the board, investors were piling money into the markets as they edged higher. While this obviously was a positive sign for increasing liquidity in local markets, there domino effects went beyond just this.
This also led to firms in Southeast Asia raising a record US$4.9 billion through IPOs in the first six months of 2021. Instead of the dream US listing, many big companies were looking at local listings.
For example, a US$1.5 billion listing for a Southeast Asian tech company on a local exchange seemed far fetched a few years ago. Then Bukalapak happened.
The fear of missing out is not a phenomenon only confined to US investors. The Gamestop saga in the US also got the attention of millennial investors in Asia.
So much so, that many started to replicate similar behaviour with local stocks.
In Thailand, millennial investors piled into local cannabis-related stocks in anticipation of regulatory changes by the government there.
In Hong Kong, retail investors borrowed more than US$50 billion to buy shares in Chinese video sharing app Kuaishou Technology’s float.
In Malaysia, investors were inspired by the Reddit orchestrated short squeeze to form their own group and do the same with the Top Glove stock.
What does this all mean
Just like the entire saga in the US, opinion on the retail explosion is divided.
Some are criticising it for the speculation and risk involved. Others are commending it for the much needed increase in retail participation in local markets.
While there are merits and demerits to both these arguments, it is certain that the retail investor in Southeast Asia cannot be ignored going forward.