Globalisation is a catchphrase for describing how the global economy has expanded and grown by including businesses in many countries to participate in varying degrees of production, distribution, and eventual consumption of nearly all products on the planet. The global economy is now interconnected as never before, and as these changes were taking place, the entire investment mindset of the investor had to change with it. Decades ago, investors may have considered investing 5% to 10% of their capital outside their domestic borders. Today, that figure is more like 25% or even higher for those investors desiring high returns.
Investors in Thailand have also followed this global trend and benefited from the higher growth dynamics and opportunities taking place beyond its national borders. It is no longer difficult to find a broker to provide access to foreign markets while also providing safety and security and a user-friendly online trading platform. Thai investors have typically favoured local companies that were known and accessible, but as one analyst recently noted: “Over the past decade, more and more Thai people have begun to invest in businesses in Vietnam, China, Japan, Europe, and America.”
Popularity tends to precede growth, and for decades, we have witnessed various international brands emerge that relate to nearly everything we do on a daily basis, from the shoes we wear to the phones we use, to access to the internet, and even to the fast food that we eat and the coffee that we drink. Investing in these popular brands has brought above average returns to those savvy investors who were willing to broaden their investment horizons to include investing overseas.
For high returns, investing in the future has been as easy as ‘FAANG’, an anagram for Facebook (now Meta), Amazon, Alibaba, Netflix, and Google (sometimes referred to as Alphabet). It is also important to note that one need not invest directly in individual companies. There are indices and exchange-traded funds (ETFs) that now follow groupings of stocks, which provides low fees, easy maintenance, and broad-based diversification for the investment process. Convenience along these lines has created thousands of these types of funds, which can be bought directly on a share basis via your selected online broker.
The brokerage industry has also changed dramatically since the 1990s. There are hundreds, if not thousands, of brokers that would like your patronage. When selecting your international broker, the key principle to follow is safety and security. You will want a well-regulated broker with low fees, access to the investments you desire, and a user-friendly trading platform that makes your process easy and enjoyable. Size can also be a good thing, and two of the largest, best-known, and well-respected global brokers are IG Group and eToro. You cannot go wrong with either of these companies.
Where should you invest? The US stock market is the largest and most stable arena for this activity. Not only are the exchanges large, heavily regulated, and very liquid, but you will also be investing in US dollar-based instruments, thereby gaining a hedge on currency fluctuations that could adversely impact the Thai baht (THB) over time. The THB has come a long way since the Asian Financial Crisis of 1997, but the COVID-19 pandemic has beaten down its value in recent years. Investing overseas in US dollar-based issues would have mitigated this issue.
Lastly, local brokers have reported that the number of Thai citizens buying global stocks has increased 200% in the first six months of 2021 compared to the same period from a year ago. A securities executive also noted that Thais favoured popular companies from the US, Europe and Southeast Asia. The CEO of Krungthai Zmico Securities, Thongmakut Thongyai, added: “Investment in foreign securities is an option that will help investors diversify risk and find high returns.” His firm ranks as the third-highest local brokerage in volume of foreign stock trades.
Citizens of Thailand have been investing overseas for decades, and this trend has been increasing, as numerical growth data presented above indicates. There have occasionally been currency controls to protect the value of the baht, but the current controls relate more to wealthy retail investors by limiting annual investments in foreign securities to US$5m per year. Check with your local banker if any of these limits may apply to you. There are, however, no regulations in the US that would prevent a Thai citizen from investing in the US stock market.
Are there tax consequences to investing overseas? Thailand does have capital gain taxes, but the taxes on foreign gains are deferred until the year that the funds are repatriated to the homeland. You might want to contact your local tax expert to validate how the various definitions apply to your individual situation. US tax authorities consider Thai citizens as non-resident aliens and exempt from capital gain taxes. A dividend tax of 30% will apply to your dividends, but your broker will withhold these monies for you.
There are essentially two ways to begin investing in global stock exchanges. There are local brokers in Thailand with the capability of connecting with exchanges in other countries. The other method is to sign up with an international online broker that offers access to the instruments that are your intended targets.
In both cases, you will have what is called a ‘nominee account’, in that the broker will actually hold the foreign shares for you, making for easy buying and selling on a market. Due to international law, you will also be required to provide personal identity information according to anti-money laundering, Know Your Customer, and anti-terrorism statutes. Once your identity is confirmed, your account will be activated.
The next step is to fund your account. Each broker will have various methods for putting funds into your account. Choose what is most convenient and cost-effective for you. You will also be asked to choose the currency that your account will be based upon. Typically, US dollars or euros are the preferred currencies. Take care with this decision as it is not easy to change. As for a minimum deposit amount, it can vary from zero to a few hundred dollars. You will want to practice on the broker’s demo platform to gain confidence in the trading process before putting real capital on the line.
There are several benefits to investing in the US stock market. First is the stability and strength of the US dollar. Second is the width and breadth of the market offerings. Larger companies equate to better liquidity, safety and security, and the potential for growth. Lastly, diversification is a big plus. Owning stocks outside of your home country in larger, more stable markets can balance the risk dynamics of your portfolio and increase your potential for better returns.
In this article, we will limit our discussion to shares of stock and ignore other investment classes such as bonds, options, real estate and commodities. The two most popular exchanges are the New York Stock Exchange (NYSE) and the Nasdaq. The NYSE is the world’s largest and hosts many major blue-chip offerings – for example:
The Nasdaq is the home for major technology companies such as Apple, Amazon, Facebook, Google, Microsoft, Netflix, Intel, Tesla, etc.
If the list of possibilities is too overwhelming, investors often prefer to invest in indices that represent the S&P 500 companies, the top 100 companies in the Nasdaq, or a host of other ETF-type offerings that provide diversification, easy access for both buying and selling, and the security of knowing that experienced professionals are in charge. If at any point, you would prefer to transfer your funds to an ETF devoted exclusively to Thailand, then the iShares MSCI Thailand ETF may be another option to consider.
Over the past several decades, globalisation has changed how we live our lives in every conceivable way, including how we invest. The trend is to participate in the global economy and not to be confined only to company shares in your home country. Citizens of Thailand have recognised the benefits of this trend and are increasing their exposure to other market offerings, especially those in the US stock market. Growth opportunities abound, and the brokerage community has made the process convenient, cost-effective, and safe. If ever there was a time to broaden your investment horizons to include the US stock market, then it is now.
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