SINGAPORE (May 8): On a normal day, setting up a brokerage account with DBS Vickers would take anywhere between five and seven days. But a check by The Edge Singapore reveals that during these couple of months, the process has been stretched to up to four weeks, as the brokerage grapples with a high volume of requests.
Evy Wee, head of financial planning and personal investing at DBS, says requests for new-to-trading accounts surged to a record high for the brokerage in the first quarter this year. In her view, investors are looking to “seize the opportunity” presented as the market turned from bull to bear.
“We see both new and younger investors wanting to make investments when stock prices fell earlier in March, whereas existing investors want to rebalance their portfolios to reflect current market sentiment,” says Wee. “More customers have also come forward to set up regular investing plans, while some existing customers have gone on to increase their monthly investment amounts.”
Other brokerages, too, have enjoyed a lift on the back of increased retail interest. CGS-CIMB Singapore’s head of retail, Raymond Chin, tells The Edge Singapore that the low prices and attractive returns have beckoned investors to come in, resulting in a 32% surge in the brokerage’s account openings for 1Q2020 from the previous quarter.
Phillip Securities, one of the more established homegrown brokerages, saw a threefold surge in new applications for the period of January to April, compared to the corresponding period last year. OCBC Securities, on the other hand, fielded a 42% y-o-y increase in requests for account openings between January and March.
According to the Singapore Exchange, its total securities market turnover value for March increased by 124% y-o-y to $48.2 billion, while securities daily average value more than doubled by 114% y-o-y to $2.2 billion.
“Covid-19 has affected many industries and countries, [but] we are seeing investors taking this as a golden opportunity to enter the market and pick up undervalued stocks,” shares CGS-CIMB’s Chin.
Alvin Tham, OCBC’s head of equities business, terms the current situation as a “market reset”. The number of customers who traded in 1Q2020 alone has already hit close to 90% of the whole of last year. “Market valuation for equities had been high for the last few years and could have been a barrier to entry for investors. The recent decline in market valuation may have fuelled the intensity and propensity of the investments tremendously,” he says.
‘Holding power’
Interestingly, both CGS-CIMB and Phillip have noticed that requests have piled in from people above the age of 30 — and not necessarily from younger investors fresh from school. Chin terms this demographic as one with “holding power”. They are at the “wealth accumulation stage” and are stocking up on quality investments at discounted prices, he adds.
Ng Aik Hong, deputy head of Phillip Investor Centre, adds: “They usually have a more stable career and income, after setting up a family and owning a home.”
Chin says that as markets are seen to remain volatile for the rest of the year, even as interest rates remain mired at near zero levels, trading interest is seen to continue as these investors hunt for better returns.
OCBC’s Tham, meanwhile, shares that account openings by investors aged 23-29 surged 61% from 4QFY2019, while account reactivations by investors aged 40 and above increased 3.6 times.
Although almost all stocks suffered from the broad-based sell-off, Tham says that investors are more selective now than prior to the pandemic, avoiding stocks that carry high risks. Blue chips in property, financial services and even offshore & marine are favourites. “Before Covid-19, traders would be invested in a diversity of sectors,” he says.
CGS-CIMB’s Chin, however, notes that investors are increasingly looking at trading overseas markets, specifically the US, which has seen the most volatility. Many have piled into US blue chips that have “taken a beating”, including Boeing, Tesla and Exxon. “Closer to home, we have seen strong interest in banks, REITs, and of course Singapore Airlines,” he says.
Besides new entrants, Phillip’s Ng has seen dormant customers coming back into the market. “Some could have been waiting to catch the better bargains in the market,” says Ng.
Although low prices may be attractive, investment experts are cautioning investors to stick to quality counters with strong fundamentals including little or no gearing, strong balance sheets and good governance. “There are a few major stock-market cycles happening in one’s lifetime and one of them is unfolding now,” says OCBC’s Tham. “There are huge trading opportunities and yet there are major pitfalls, as companies’ earnings get rebased over the next few quarters.”
