Sunday, July 02, 2006

US Markets vs New Zealand or Australian Stock Exchanges

Q. Why do I live in New Zealand but trade the US stock markets?

A. Market capitalization. Market Capitalization is the total dollar value of all outstanding shares. It is calculated by multiplying the current market price by the number of shares. Consider the market capitalization figures in the graph below:


Market Cap

(USD Millions)

New Zealand Exchange


Australian Stock Exchange


American Stock Exchange






*At 31 December 2005

The entire market capitalization of the New Zealand share market (in USD$) is $38,741.2 Million. Compare this to the market capitalization of General Electric Co. (GE), just one company traded on the NYSE, which has a market cap of $367,100 million. This is nearly ten times the value of the NZSX and two-fifths the size of the Australian SE.

I started out trading the New Zealand market but soon moved to trading the Australian market because of the greater opportunities there. After only trading the Australian share market for a few months I realized more opportunities existed with the 20,000+ companies available on the three main exchanges in the USA. There was simply not enough opportunities and not enough liquidity in either the Australian or New Zealand share markets. To trade stocks on a short-term basis requires liquidity, and liquidity requires gigantic volume.

Some investors would rather buy local companies; because they are the companies they know, and are close to home. Using my trading methodology, half the time I don’t even know the name of the company; all I know is it's ticker, or symbol. The company’s name, what it does, or where it is based is not important. Instead, what is important is the chart setup, and then the explosive move that follows. If you do like to know all about the company whose shares you are buying though, all the news and information can be easily found on the internet – see useful websites.

The huge difference in brokerage fees and the tighter bid/ask spreads are the other two main reasons I trade the US stockmarkets, rather than the New Zealand Stock Exchange or the Australian. In the US, brokerage fees are about 0.5 cents per share (depending on the brokerage house), compared to about $25 (flat rate) in NZ or Aus. The big difference this makes is covered in depth in my article on slippage.

Next Article

*Please leave any comments you may have at Reeholio Stock Market Trading Home Page