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 5,993 locations worldwide, but U.S. operations still contributed 76.3% of the company’s FY2019 revenue of US$515.4 billion.
Not only that, the U.S. is also home to some of the most innovative companies in the world. This mixture of invention and a large domestic market to test new ideas means we’ll continue to see fast-growing American companies with the potential to disrupt new industries in years to come.
Have a look at the returns of some of the best U.S. companies over the last five years:
Even a company already as large as Amazon was able to grow 474.0% in just five years. You’d be hard-pressed to find any companies of similar scale and quality if you only stick to investing within Singapore.
How to buy U.S. shares in Singapore
As a foreigner investing in the U.S. market, it’s important to note that even though you don’t face any capital gains tax on your stocks investments, you do pay a 30% withholding tax on dividends. Knowing this, it makes sense to invest in U.S. stocks for growth and capital appreciation. (On the other hand, Singapore doesn’t have a dividend tax — which makes many Singapore stocks/REITs a great vehicle for dividend income.)
If you’ve never bought a U.S. stock before and you’ve always wondered how you can do so, it’s pretty straightforward. In this article, I’ll list the brokerage options available for Singapore residents, and the pros and cons of each of the top choices.
|Brokerage||Min. Fees (US$)||Trading Commissions||Custodian Fees|
|CGS-CIMB Securities||20||0.30%||S$2 per counter per month|
|Citibank Brokerage||25||0.30%||0.01% of your monthly average stockholding balance, up to a maximum of USD 100 every six months|
|DBS Vickers||25||0.18%||S$2 per counter per month|
|FSMOne||8.80||0.08%||No custodian fees|
|Interactive Brokers||1||US$0.005 per share, up to a maximum of 1.0% of trade value||Up to US$10 per month (less commission paid that month), waived if account has greater than US$100,000 in average equity for a calendar month|
|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|
|OCBC Securities||20||0.30%||S$2 per counter per month|
|Phillip Securities||20 flat fee||-||S$2 per counter per month|
|RHB Securities||20||0.30%||S$2 per counter per month|
|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|
Fees for U.S.-listed stocks. Updated as of 8 August 2020.
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, five brokerages stand out: TD Ameritrade, Interactive Brokers, Saxo Markets, FSMOne, and Tiger Brokers. All five 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. However, they charge a maintenance fee of US$10 a month, which is waived if you have US$100,000 in your account. So unless you’re willing to fund your account to that amount or make at least 10 trades a month, this may be unsuitable for some investors. (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 (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%.
If you want access to global markets but have less than US$100,000 for your stock portfolio, then Saxo Markets would be the more practical choice compared to Interactive Brokers. Its annual custodian fee will become more expensive as your portfolio grows larger (>US$100,000). When that happens, you can choose to move to Interactive Brokers if you wish to save even more on fees in the future.
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. 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. 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.
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 five brokerages we highlighted would be your best options, especially when compared to the excessive fees charged by many Singapore brokerages.