Kiwis can now buy even more foreign shares with Hatch.
We’ve just added hundreds of foreign shares to Hatch! Kiwi investors can now access publicly traded international companies such as Alibaba, Tencent Music, Nokia and Unilever through the rollout of American Depositary Receipts (ADRs).
Yes, another acronym for you to know, but it’s a good one. ADRs give investors a simple way to invest in international companies.
How ADRs work
It’s simple: US depositary banks buy shares in a foreign company listed on a foreign share market and repackage them to list on the US share markets as ADRs. Basically, each ADR represents a specific number of shares in a foreign company determined by the bank issuing the ADR. For example, one Alibaba ADR represents one share in the company, but, one British Petroleum ADR represents 6 shares in the company. This is what’s known as the ‘ADR ratio’ or the ‘conversion ratio’. ADRs can either be sponsored or unsponsored by agreement with the foreign company (sponsored) or not (unsponsored). Hatch only provides access to sponsored ADRs.
The benefits of buying ADRs
So, why buy an ADR? Well, if you’re looking at another way to diversify your portfolio by accessing global behemoths like Alibaba, Toyota, and Baidu, then this could be right up your alley. And you’re not alone. ADRs are getting more and more popular because they have some advantages that make them appealing to investors. So, what are these advantages exactly?
Firstly, they’re easy to purchase. ADRs are bought and sold just like your Netflix and Nike shares. Secondly, you don’t need to worry about dealing with foreign broking accounts, because you can buy them through Hatch. And finally, prices for ADRs are quoted in US dollars, and dividends are paid in dollars. All you need to do is decide which ADRs to invest in (but before you invest, make sure you read our FAQs on all things ADRs).
ADRs available to you through Hatch
Now that you understand what an ADR is, let’s look at some of the best-known ADRs you can access through Hatch:
Teva Pharmaceutical Industries Ltd. (TEVA)
Teva Pharmaceutical Industries Ltd. is an Israeli pharmaceutical company that focuses on generic drugs and specialty medicines that are sold globally.
Alibaba Group Holdings Ltd. (BAxBA)
Alibaba Group Holdings Ltd. is a Chinese company that sells products, services, and technology online to buyers around the world.
JD.com Inc. (JxD)
JD.com Inc. is an online direct sales company based in China that focuses on electronics, home appliance products, and general merchandise. It competes directly with companies like Alibaba.
Nokia OYJ. (NOK)
A Finnish company specialising in network and Internet protocol (IP) infrastructure, software, and related services markets. Its products range from enterprise IP networks to consumer security products.
Petroleo Brasiliero SA. (PBR)
A Brazil-based company specialising in the oil, natural gas, and energy industry. It operates a large offshore drilling program in Brazil where there are substantial crude oil reserves.
Xunlei Ltd. (XNET)
A cloud-based acceleration technology company that enables users to access, manage and consume digital media content. In particular, the technology is designed to reliably speed up the delivery of online content.
Gold Fields Ltd. (GFI)
A South African company specialising in mining gold, holding gold reserves, as well as the exploration, developing, extraction, processing, and smelting of gold.
Cemex SAB De CV. (CX)
A Mexican company specialising in the production, distribution, marketing, and sale of cement, ready-made concrete, aggregates, clinker, and other construction materials around the world.
A chinese technology company specialising in Internet-related services and products, and artificial intelligence. It’s one of the largest AI and internet companies in the world.
The fine print
Custodial fees for ADRs tend to vary – generally ranging from $0.01 - $0.03 per ADR. You can find the exact fees on the SEC’s website by searching for a specific company and viewing its F-6 registration statement. Heads up though, the website is awful to navigate! Don’t say we didn’t warn you.
As for tax, remember, talk to your professional tax advisor or accountant if you have any concerns, preferably before you buy!
ADRs can be a powerful tool for making targeted investments in specific companies, sectors and countries and can be an excellent addition to your existing Hatch portfolio. Want to know more about ADRs? Check out our FAQs.