Why you should consider trading the international markets

Perhaps the most obvious reason to trade in international markets is to hedge against the weakening rand, which has more than halved in value against the US dollar over the last 10 years, as shown in the chart below.

For those traders focused exclusively on SA assets, this depreciation has cost them dearly.

Looked at another way, the JSE All Share Index, measured in US dollars, climbed a miserly 54% over the 10 years to December 2021. The S&P 500 climbed 354% over the same period.

In other words, you would have been nearly seven times better off with a passive investment in the S&P 500.

The reasons for this disparity are obvious, says Shaun Murison, senior market analyst at IG Markets SA. “The problem you have if you limit yourself to the JSE is that there are only about 40 or 50 tradable stocks. Once you start investing abroad, you have more than 12 000 stocks from which to choose, not to mention a vast range of bonds, commodities, forex pairs and other markets.

“You cannot buy the world’s biggest and best-run companies on the JSE,” he adds.

“To get invested in companies like Apple, Amazon, Meta [Facebook] and Alphabet, which is Google’s holding company, you need to be investing abroad. There are also certain sectors that have little or no representation on the JSE, such as aviation, energy and transport.

“There’s no question that you have to be invested internationally to get a truly diversified portfolio, and part of any diversification is to spread your investments over multiple geographies.”

Notwithstanding periodic bouts of strengthening, the overall trajectory of the rand against the US dollar has been one way.

USD-ZAR exchange rate

Source: Share Magic

What are CFDs?

IG Markets allows clients to trade contracts for difference (CFDs), which are a type of derivative that gives you exposure to the price movement in an underlying security without ever owning the security. For example, if you purchased a CFD on Apple, your trading account will reflect the underlying price movements in the actual stock, but you will never actually own the stock or receive dividends. You are also able to leverage your trading position, meaning you can magnify the underlying price movement up to five times the spot market price.

It’s important that you take steps to manage your risk, because leverage can increase both your profits as well as your losses.

Key benefits of trading offshore with IG Markets

A key benefit to trading offshore markets is that a large and expanding list of international stocks offer extended trading hours, which means you are not restricted to short trading windows, as is the case on the JSE and with most equity markets around the world.

Yet another benefit of going offshore: trading fees are lower.

“International indices have lower spreads due to increased liquidity. If you are a day trader or a high-frequency trader, this makes a huge impact on your bottom line over time,” says Murison.

• Access over 12 000 international shares – including US-, UK- and EU-based companies;
• Choose from 80 currency pairs, such as EUR/USD, AUD/USD and EUR/JPY;
• 24-hour dealing on global indices, including Wall Street (IG’s equivalent of the S&P 500), the FTSE 100 and Germany 40 (IG’s equivalent of the DAX); and
• The ability to trade on a range of exciting markets, including bonds, commodities, metals, energy prices, rates and options.

Murison explains how to get started with international trading through an IG Markets account.

What is an international IG account, and how does one get one through IG Markets?

To trade global markets, you’ll need to open an international account, which is a South African Reserve Bank requirement.

To get an IG international account, you must fill out an application form for a live account. You’ll automatically be given both a domestic and international account, but it’s entirely up to you whether to fund just one or both.

How do clients fund an international account?

Funding an international account can be done by credit, debit card, or bank deposit.

Clients can fund their international accounts in two quick steps:

1. Log into your account, click on MyIG and go to the ‘live accounts’ tab. Click on ‘bank details’ and add your card details.
2. Click on ‘deposit funds’, enter your card details, add the amount you want to pay, and then hit ‘deposit’. The rand value paid into your offshore account can be converted into the base currency of your choice.

There are no costs when depositing via card into your offshore trading account.

About IG Markets South Africa: IG Markets South Africa was established in 2010 and is regulated by the Financial Sector Conduct Authority (in South Africa) as an over-the-counter derivative provider and an authorised financial services provider (FSP No 41393). It has an office in Sandton to service its thousands of South African clients. Its board and senior management in South Africa consist largely of South Africans, making it a truly South African operation. As one of the biggest employers in the online broking category, it is proud to be playing a leading role in the growing financial services industry in South Africa

Note that CFD losses can exceed your deposits.

IG Markets is part of the LSE-listed IG Group, which has a market cap of £3.4 billion (R71.4 billion). It has more than 330 000 active clients worldwide.

Brought to you by IG Markets South Africa.

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