As remarkable as Singapore is as a first world financial hub, our local stock market is rather… humdrum. And the main reason for that is — with 5.6 million people — the Singapore market is just too small. So unless a home-grown Singaporean company is able to expand beyond its shores, its potential growth remains limited.
However, expanding overseas into new markets brings a new host of challenges. In a region as culturally diverse as Asia, a company needs to understand different languages and local customs in each new market, and navigate the unique business regulations, tax codes, compliance laws of each country. So unless a company is able to successfully crack the humongous Chinese market, it remains challenging for many firms to grow bigger beyond Singapore.
Case in point: Old Chang Kee generates 99.5% of its revenues in Singapore (with the rest trickling in from Malaysia and Australia). Old Chang Kee’s curry puff stalls already dot the island nearly everywhere; how much larger can it grow staying in Singapore?
From sea to shining sea…
Now compare this to the United States where its home-grown companies have access to a wealthy, homogenous market of over 330 million consumers who speak the same language, share the same customs, and spend the same dollar. It’s no surprise that American corporations are some of the largest and most successful in the world. Even if they delay venturing overseas, they can rely on their domestic market alone to grow to a tremendous size.
For example, Walmart was founded in 1962 but only opened its first international store in Mexico City in 1991. Today, Walmart has since expanded to over 5,000 locations internationally, but U.S. operations still contributed almost 70% of the company’s FY2022 revenue of US$572.8 billion.
Not only that, the U.S. is also home to some of the most innovative companies in the world. This mixture of invention and a large domestic market to test new ideas means we’ll continue to see fast-growing American companies with the potential to disrupt new industries in years to come.
Have a look at the returns of some of the best U.S. companies over the last five years:
Even a company already as large as Apple was able to grow 385.2% in just five years. You’d be hard-pressed to find any companies of similar scale and quality if you only stick to investing within Singapore.
How to buy U.S. shares in Singapore
As a foreigner investing in the U.S. market, it’s important to note that even though you don’t face any capital gains tax on your stocks investments, you do pay a 30% withholding tax on dividends. (You also face estate taxes on U.S. stocks and assets when one passes on).
Knowing this, it makes sense to invest in U.S. stocks for growth and capital appreciation. (On the other hand, Singapore doesn’t have a dividend tax — which makes many Singapore stocks/REITs a great vehicle for dividend income.)
If you’ve never bought a U.S. stock before and you’ve always wondered how you can do so, it’s pretty straightforward. In this article, I’ll list the brokerage options available for Singapore residents, and the pros and cons of each of the top choices.
|Brokerage||Min. Fees (US$)||Trading Commissions||Custodian Fees|
|CGS-CIMB Securities||20||0.30%||S$2 per counter per month*|
|Citibank Brokerage||25||0.30%||0.0165% of your monthly average stockholding balance, up to a maximum of S$100 every six months|
|DBS Vickers||25||0.18%||S$2 per counter per month*|
|FSMOne||8.80||0.08%||No custodian fees|
|HSBC||10||0.15%||No custodian fees|
|Interactive Brokers||1||US$0.005 per share, up to a maximum of 1.0% of trade value||No custodian fees|
|KGI Securities||20||0.30%||None stated|
|Lim & Tan Securities||20||0.30%||S$2 per counter per month*|
|Maybank Kim Eng Securities||20||0.30%||S$2 per counter per month*|
|Moomoo||0 for the first year||0||No custodian fees|
|OCBC Securities||20||0.30%||S$2 per counter per month*|
|Phillip Securities||20||0.30%||Temporarily waved until 31 December 2022 and S$2 per counter per month thereafter*|
|ProsperUs||5||0||No custodian fees|
|Saxo Markets||4||0.06%||0.12% p.a. of stockholding balance, custodian fee calculated daily using the end of day values and charged on a monthly basis|
|Standard Chartered||10||0.25%||No custodian fees|
|TD Ameritrade||0||0||No custodian fees|
|Tiger Brokers||1.99||US$0.01 per share||No custodian fees|
|UOB Kay Hian||20||0.30%||S$2 per counter per month*|
|uSMART||1.00||0 (until 31 Dec 2022)||No custodian fees|
Fees for U.S.-listed stocks. Updated 31 August 2022. *Custodian fees of up to a maximum of S$150 per quarter (S$200 for OCBC Securities).
From the table above, you’d notice that most traditional Singapore brokerages charge trading commissions of 0.30% with a minimum fee of US$20-25 to trade U.S.-listed shares. You’ll see that most of them also charge a monthly custodian fee of S$2 per foreign stock. So if you own 10 foreign stocks, you’re paying an extra S$20 a month in custodian fees for your brokerage firm to hold the shares for you.
However, six brokerages stand out: TD Ameritrade, Interactive Brokers, Saxo Markets, FSMOne, Tiger Brokers, and Moomoo. All six are solid options if you’re looking for a cheaper way to access the U.S. market compared to the traditional Singapore brokerages.
TD Ameritrade stands out here due to the fact that they offer zero-commission trading (that’s right). The brokerage only offers you access to the U.S. market, but if you only intend to invest there then you can’t get any lower than zero commissions.
However, do note that Charles Schwab recently acquired TD Ameritrade, and may possibly close TD Ameritrade’s Singapore branch like it did recently for its own Singapore branch. (I was a Charles Schwab client previously and had to liquidate/transfer my holdings because of that.)
Interactive Brokers has one of the lowest minimum fees at just US$1. As of July 2021, Interactive Brokers has eliminated its US$10 monthly maintenance fee which makes it probably the most attractive option right now in terms of fees and market access. (Interactive Brokers also offers zero-commission trading accounts called IBKR Lite but that is only available in the U.S. and India at this moment.)
The advantage of Interactive Brokers is that it offers you global access to markets in the U.S., Europe, and Asia. So if you intend to invest outside of the U.S. as well, then Interactive Brokers would be more suitable for you.
Saxo Markets also offers relatively low minimum fees at US$4 for U.S. stocks and gives you access to 37 exchanges around the world including the U.S., Europe, China, Hong Kong, Japan, and Australia. However, they do charge an annual custodian fee of 0.12% (or 0.6% if clients opt into securities lending).
Saxo also offers access to ETFs, bonds, mutual funds, CFDs, commodities, forex, futures, options, and cryptocurrency. So if you’re investor or trader that requires access to wide range of products, then Saxo would likely be the one-stop platform for you.
FSMOne is a solid option if you prefer to stick with a Singapore brokerage. Their minimum fee is higher (US$8.80) for U.S. stocks and they only offer access to the Singapore, Hong Kong, and U.S. exchanges as well as China A-shares. But if you plan to invest only in those markets, this shouldn’t be an issue.
The one advantage of FSMOne — as a Singapore brokerage — is that they can be linked to your CPF. So you plan to invest in Singapore stocks using your CPF funds, then keeping all your Singapore and U.S. holdings under one brokerage account might be more convenient for you.
Tiger Brokers is a recent entrant to the Singapore brokerage scene. Founded in 2014, Tiger Brokers is a Chinese online stock brokerage startup that’s backed by Interactive Brokers and listed on the Nasdaq. They also offer one of the lowest minimum fees (US$1.99) for U.S. stocks and provide access to Singapore, China, Hong Kong, Australia, and U.S. exchanges.
As a Chinese firm, the main advantage of Tiger Brokers is their low-cost access to the Shanghai and Shenzhen exchanges. If you want to invest in the U.S. and China — two of the largest economies in the world — then Tiger Brokers is a great option.
Moomoo is another international broker that recently entered the Singapore market. They offer lifetime commission-free trading and waive the first year of platform fees for the U.S. stock market. After one year, it reverts to just the platform fee (US$0.99). Moomoo is owned by Hong Kong-based Futu Holdings which is backed by Tencent, one of China’s largest companies. Futu is also listed on the Nasdaq.
Moomoo also offers low-cost access to the Singapore and Hong Kong stock markets at just S$2.49 and HK$18 minimum per trade respectively. If the U.S., Singapore, Hong Kong, and China A-shares are your main markets and you’re looking for some of the lowest fees around, Moomoo would be your choice.
The fifth perspective
The strength and ingenuity of the American economy over the last hundred years means that the U.S. stock market is home to many of the best companies in the world. Until Asia catches up over the next few decades, the U.S. will arguably remain the most attractive equities market for investors everywhere.
If you also plan to invest in the U.S., then the six brokerages we highlighted would be your best options, especially when compared to the excessive fees charged by many Singapore brokerages.