Invest in Asian Brands Listed on NYSE/NASDAQ Via ADR Stocks
Alibaba, Grab, Nio, Sony, Toyota. They are all listed on NYSE/NASDAQ but not as common stocks but as ADRs.
In fact, many well-known Asian companies have chosen to list their ADRs on U.S. stock exchanges to expand the network of investors who can invest in their companies.
It showcases the economic strength and technological innovation emerging from the region. These brands have not just gained popularity domestically but have also earned global recognition.
What are ADRs? It stands for American Depositary Receipt serve as a gateway to international brands. Imagine ADRs as your personal passport to the international business world with each company akin to a stamp in your investment “passport” aka portfolio.
It offers a chance for investors (especially beginners) to curate an international investment portfolio without having to endure the complexities of managing multiple trading accounts across various Exchanges.
But like any shiny thing, there are always pros and cons you should be aware of.
The Allure Of Trading ADRs
- Access to international brands
- Diversified choices – comprising of established giants to promising up and comer brands.
- Lower currency risk
- Earn dividends (where applicable)
The Flaws In Trading ADRs
- Limited choices
- Extra fees*
- Market risks associated with local economic conditions.
- No voting rights.
The Fees*
There are 5 types of fees associated with trading ADRs that you should be aware of.
- Depositary Receipt Fees:
Covers ADR program creation and maintenance costs. Fees differ among ADRs; investors should take note. The fee is deducted from your Cash Upfront account, recorded under cash movement and the monthly statement.
- Conversion Fees:
Don’t forget, ADRs are traded in USD so we will convert your Ringgit Malaysia accordingly. With Rakuten Trade, you have the option to trade in RM (and we’ll handle the conversion for you back end) or at time of sell, leave the funds in USD for use on your next trade.
- Custodian Fees:
Includes services like dividend payments, voting, and corporate actions. At Rakuten Trade, this fee is absorbed.
- Tax:
While not a direct fee, investors should be aware of tax charges related to dividend paying ADRs. A 15% withholding tax on dividends is applied to all foreign investors. We deduct it from your sales proceeds before transferring the balance into your trading account.
- Trading Commissions aka Brokerage:
Of course, like any investments made, a commission / brokerage is charged. With Rakuten Trade it’s the lowest in town from RM1 to RM100 depending on the transaction value regardless of whether it’s for MY, US or HK markets. If you’re trading in USD, brokerage fee is between USD1.88 to USD25.
New ADR in 2023
Arm Holdings Plc (ARM) is one of the most popular semiconductor stocks and a big rival to the likes Nvidia, Advanced Micro Devices and Intel.
Stock Name: ARM Holding Plc ADR
Stock Code: ARM
Current Price: USD61.750 (taken as of 22 November 2023)
Learn more about ARM HERE!
ADRs allure is captivating for investors to explore and participate in the success stories of prominent Asian brands. As the world becomes increasingly interconnected, ADRs serve as a bridge, connecting investors with the exciting opportunities emerging from the vibrant markets of Asia and beyond.
As a word of caution, before you invest in ADRs, please carefully consider factors like geopolitical risks and the economic conditions in the home countries of these companies.
Considering everything, is investing in ADRs a strategy worth exploring?
