Tiger Brokers: Leading stocks in Asia are finding demand as US bond yields start to rise

Tiger Brokers is a global brokerage platform that gives Australian investors simple access to ASX and US stocks. Listed on the Nasdaq, the trading group’s Australian division is offering zero brokerage on both US stocks and ASX shares for the first 3 months.

After a strong start in April, US stocks hit the brakes this week as investors assess an increasingly complex outlook for 2022.

Russia’s invasion of Ukraine has reverberated across the commodities complex, adding supply-side pressures to what was already a high-inflation environment.

In turn, US bond yields are again marching higher, with the yield on benchmark 10-year bonds climbing to multi-year highs over the past seven days.

It’s brought the familiar market adage back into focus, about how high-growth tech stocks perform when rates start to rise.

Losses in the US have been felt more keenly on the tech-focused Nasdaq index – home to many of those high-growth tech names.

In light of the latest market ructions, Tiger Brokers’ Chief Strategy Officer, Michael McCarthy, provided some insights into the latest round of repositioning.

“Rising inflation and the higher interest rates it brings are a threat to high flying, high growth stocks,” McCarthy said.
As other asset classes become more attractive, investors will demand a higher reward for sticking with stocks that are at or near all-time highs. Stock markets could see an effect known as ‘P/E compression’.”

The P/E (or price/earnings) ratio is calculated as the stock price (P), divided by company earnings per share (E).

“Price to earnings ratios are a much-used rule of thumb in stock valuations,” McCarthy says.

A higher P/E suggests a stock is popular, but may be expensive.

However, “as investors move away from stocks, the P/E falls, despite a positive or neutral earnings outlook”, McCarthy said.

“This P/E compression justifies formerly popular stocks trading at lower share prices.”

What were the top 10 most traded US stocks on Tiger Brokers globally last week?

1. TSLA
2. SE
3. NIO
4. GRAB
5. BABA
6. AAPL
7. PLTR
8. TIGR
9. FB
10. BILI

While Tesla held its number-one spot, a number of new companies joined the Top 10 for Tiger traders, accompanying the broader changes in global markets last week.

New additions to this week’s Top 10 included Singapore-headquartered Grab Holdings – a leading ride-sharing and food delivery platform in south-east Asia.

Also in the Top 10 was Bilibili, a China-based Bili video sharing platform headquartered in Shanghai.

New York-listed Sea Ltd, a tech conglomerate also headquartered in Singapore, was another strong performer.

McCarthy said that as investors react to rising interest rates and higher inflation, the investor focus will shift from high-growth companies to platforms that can protect their pricing power.

“Stocks that have good control of their supply chains can do well in an inflationary environment,” McCarthy said.

“Consumers expect price rises, and if the company can control its costs it can lead to higher margins and profits.”

What were the top 10 most traded US options on Tiger Brokers globally?

1. TSLA
2. BABA
3. QQQ
4. AAPL
5. SPY
6. NIO
7. NVDA
8. BILI
9. SE
10. AMD

Similarly to stock investments, options investors on the Tiger Brokers platform also showed an increased preference for leading Asia-based companies last week.

“The recent underperformance of US indices against key Asia Pacific markets suggests repatriation and rotation is already occurring,” McCarthy said.

That shift is being “illustrated by the increasing popularity or regionally listed stocks”, he added.

In addition, “the big question markets over the outlook for Europe means global investors are increasing likely to turn to investment opportunities in this part of the world,” McCarthy said.

This article was developed in collaboration with Tiger Brokers, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.