EV giants, tech behemoths and one meme stonk: How Aussie investors played the Q1 market turbulence
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March proved to be a strong month for global stocks, as investors stared down rising interest rates accompanied by the prospect of an extended conflict in Ukraine.
But it capped off a volatile quarter, after stocks fell sharply in January as the world’s emergence from the pandemic sets a more complex backdrop for investors.
And for a snapshot into how domestic investors are looking at the market, all the familiar US tech heavyweights held their standing as favourites on the eToro platform.
The latest round of monthly eToro data shows Aussies are still keen on the global electric vehicle players – Tesla and Nio.
Both companies held their top two spots as the most-held companies among investors on the platform.
Elon Musk’s EV maker has bounced strongly off its 2022 lows below US$800 to climb back above US$1,000, although the stock has yet to climb back to its year-end 2021 levels at almost US$1,200.
It’s a similar story for Shanghai-headquartered Nio, which is listed in the US and started the year at around US$35 before edging back towards the US$20 mark.
For eToro Global Markets Strategist Ben Laidler, the confidence of investors indicates their belief in the longer-term upward trend of the global EV sector.
eToro investors increased their Tesla holdings by 12 per cent between Q4 2021 and Q1 2022, while there was a 6 per cent increase in the number of investors holding Nio.
“The growth of open positions for tech stocks during the difficult trading period that was Q1 2022 suggests investors are making the most of the current market volatility and looking to ‘buy the dip’ to add to long term positions at a low price point,” Laidler said.
Laidler noted that along with the Russia-Ukraine conflict, the March quarter also marked a shift in how investors are dealing with the prospect of rising interest rates.
“High inflation and rising interest rates tend to hit tech stocks harder than other sectors because their valuations are based on future rather than present earnings,” Laidler said.
“The problem is that in a high inflation/rising interest rate environment, those future earnings are worth less and, theoretically speaking, make the sector less attractive.”
But as volatility picks up, Australian investors are “sticking to what they know” when it comes to investing in US stocks, eToro analyst Josh Gilbert said.
Rounding out the Top 10 list for the most held stocks on the platform are a host of big US tech names, led by Amazon and Apple.
In line with the ‘buy the dip’ trend, Meta (Facebook) also jumped back into the Top 10 after falling to 17th in Q4.
The world’s largest social media platform came under fire in the March quarter after earnings results missed expectations.
But since then, global investors have shown faith in its established revenue models and longer-term metaverse strategy, as Meta shares bounced off their lows in line with the broader March rebound.
“While the sector has wobbled of late, the fact the tech-heavy NASDAQ index has rallied more than 12 per cent since the middle of March suggests the recent correction could be short-lived,” Laidler said.
“Of course, it is very difficult to be sure that is the case given the uncertain economic backdrop. If the situation in Russia escalates, or central banks increase rates faster than expected, then this could have negative ramifications for all stocks, including those in the tech sector.
Other big US tech stocks that returned to the Top 10 included chip company NVIDIA and Google parent Alphabet – another sign that investors moved back into established tech names as volatility picked up.
Another famous US company, GameStop – otherwise known as the world’s foremost ‘meme stonk’ – kept its position in the Top 10, although it slid down to 10th spot from a No 7 ranking in Q4.
“Names such as Microsoft, Tesla, and Meta Platforms solidify that investors aren’t trying to find a needle in a haystack with their investments,” Gilbert said.
“In particular, Apple and Amazon are also outperforming the benchmark of the S&P 500 this year. These stocks are standing up as all-weather equities that offer investors stability in what has been a tough start to 2022 for the tech sector.”