1. What are international markets?

At the heart of international investing lies the idea of diversification. International sharemarkets are those located in a foreign jurisdiction subject to another country’s regulations. They’re a great way for investors to increase the diversity of their portfolios, adding different elements that might not be as available, or as developed, in Australia’s sharemarket. They represent a sizeable opportunity compared to the domestic market.

 

In short

  • International sharemarket open up the biggest economies and companies
  • Buying international shares is a great way to boost diversification

The total sum of Australia’s local sharemarket is a little over $2 trillion. That’s pretty big—it’s certainly not a global slouch.

However, the combined value of all US-listed sharemarkets tips about US$26 trillion, with the New York Securities Exchange leading the pack, followed by the NASDAQ. The Hong Kong, Tokyo and Shanghai exchanges battle for a distant third, with only about US$6 trillion in total market value each.

That’s a lot of shares when compared with Australia’s market. The size of some overseas companies can also dwarf those listed here. The largest company on the Australian market is BHP at AUD$219.7 billion (as of 18 Jan. 2021). In comparison, Apple—the largest company in the US—has a market cap of AUD$2.78 trillion (as of 15 Jan. 2021). So, there’s lots to choose from, depending on your investment strategy and risk appetite.

You can also dice the world’s sharemarkets in a number of ways. Typically, investors split them into Developed and Emerging Markets.

Developed Markets

 

These are well established sharemarkets, linked to the world’s leading rules-based economies with a large number of high quality blue-chip companies available to buy and sell. They experience a large daily trade volume, are highly regulated, sophisticated and transparent.

US markets are the most highly traded and their exchanges host some of the world’s most well-known companies, like Facebook, Ford Motor Company, or Boeing. The major exchanges include the New York Securities Exchange and the tech-focused NASDAQ. Japan’s Tokyo Stock Exchange also hosts some recognisable names, like Asahi Group, Bridgestone and the Honda Motor Co.

 

Emerging Markets

 

Unlike the developed world, these markets are less established, and typically don’t feature as many recognisable companies. Their trading systems are less sophisticated and their regulations may not be as refined as their developed peers. They are typically connected to countries with weaker, less developed economies, such as Indonesia, Thailand or Turkey.

Disclaimer

CommSec Learn is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Investors should consult a range of resources, and if necessary, seek professional advice, before making investment decisions in regard to their objectives, financial and taxation situations and needs because these have not been taken into account. Any securities or prices used in the examples given are for illustrative purposes only and should not be considered as a recommendation to buy, sell or hold. Past performance is not indicative of future performance. Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and a market participant of the ASX & Chi-X Australia, a clearing participant of ASX Clear Pty Limited and a settlement participant of ASX Settlement Pty Limited.

 

 

Disclaimer

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