Latest news with #foreignstocks
Yahoo
4 hours ago
- Business
- Yahoo
How an ADR works: What US investors need to know
Investors who buy foreign stocks often don't own the shares directly — they hold American Depositary Receipts, or ADRs. Yahoo Finance Markets and Data Editor Jared Blikre explains how ADRs work, the risks like currency swings, and why most US investors prefer them over buying foreign shares outright. Twice a week, Stocks In Translation cuts through the market mayhem, noisy numbers and hyperbole to give you the information you need to make the right trade for your portfolio. You can find more episodes here, or watch on your favorite streaming service. To watch more expert insights and analysis on the latest market action, check out more Market Catalysts. Here's something that might surprise you. If you're in the US and you own a foreign stock, like Alibaba, AstraZeneca, or Toyota, chances are, you don't really own the stock. What you own is the wrapper. And on today's Stocks and Translation, we're going to be breaking down American Depository Receipts, or ADRs, the key to having exposure to foreign stocks. So, knowing how these wrappers work can really save you a lot of time and money and confusion, so let's start with the definition. An ADR, or American Depository Receipt, and note that it's an A in Depository, not an O. It's a US-traded security issued by a bank that represents shares of a foreign company. Now, you trade in dollars, you get dividends in dollars, but under the hood, it's tied to the home market shares and also the home currency. Let's take the Chinese multimedia giant Tencent as an example. In this chart here, we can see the home shares in blue with the ticker The hk stands for Hong Kong, and unlike the US, all of their tickers are numbers, not letters. Also, in the chart in white is the US-listed ticker, TCEHY. You're going to notice that the returns are different. The difference is mainly because the US ticker is priced in US dollars, while the home country ticker is priced in Chinese yuan. So, it's possible to make or lose money just by how much the dollar fluctuates. If a foreign company wants to list its shares in the US, it works with what's called a depository bank. The bank, in turn, works with a local custodian that holds some of the home market shares. And one of the big jobs of the bank is to set what's called an ADR ratio, where 1 ADR may equal a whole share, a half, 3, or 10, or however many of the home country shares. In our example here, Tencent, JP Morgan is the bank, and they happen to have set their ratio to just 1. So, 1 Tencent Hong Kong share equals 1 US ADR. And if prices drift, arbitrage keeps them aligned. Pros buy the cheaper side and sell the more expensive side until they snap back in line. Then, there are three different levels of ADRs, which helps determine how and where they trade along with how the company can use them. Level 1 ADRs trade not on an exchange, like the Nasdaq or the New York Stock Exchange, but over-the-counter or OTC market. That's where Tencent ADRs trade. Level 2 or 3 means that they trade or list on an exchange. And Level 3 alone adds the ability of the company to raise capital or money in the US. And a few housekeeping notes here: Dividends, they start in the home country, and then the bank converts them to dollars after withholding taxes and paying any depository fees. Stock splits show up as ratio adjustments. And when it comes to company spin-offs or rights issues, ADR holders may get a cash lump sum. And note that it usually takes longer for actions that affect the home company stock to make their way to the US investors. So, now, let's go over some of the risks. And we start with the big one: currency or foreign exchange movements. Even when the company stock does well on its home turf, a strong dollar can eat at those returns. And on the flip side, a weaker dollar can juice the performance. Then we have policy risks, which can include everything from regulatory crackdowns to sanctions and potential delistings. And finally, we have liquidity and hours. ADRs, they trade over US hours. So, remember that news can hit one side first, while the other is closed. By now, you might be wondering if you can just skip all this ADR stuff and buy the overseas directly. Some brokers allow it, but expect some friction, like extra approvals, foreign exchange conversion, local taxes, even stamp duties. And remember, you're going to be trading during market hours over there. For most US investors, the ADR route is simply the most practical route. Finally, here's your three-step sanity check. Number 1: map the ADR to the home country ticker. This is simple enough using the Yahoo Finance app or site. Two: compare the long-term returns, which you can also do on our app and site. You want to get a feel for how big the gaps can be due to these currency moves we've been talking about. And three: check the fine print. Depository fees and ratios, withholding taxes, as well as how your broker passes them through. Bottom line, you're not just buying a company. You are buying a package. If you know the ratio, the currency, and the fees, you can understand what you really own. And when you see the home country and US tickers move a little bit differently, you're going to know exactly why. Tune into Stocks and Translation podcast for more jargon-busting deep dives. New episodes can be found Tuesdays and Thursdays on Yahoo Finance's website or wherever you find your podcast. 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CNA
07-08-2025
- Business
- CNA
Japanese investors ditch foreign stocks on US economic concerns, tariff tensions
Japanese investors significantly sold foreign stocks in the week to August 2 as major markets retreated on caution over U.S. economic outlook and a new set of trade tariffs. According to data from Japan's Ministry of Finance released on Thursday, domestic investors withdrew a net 752.1 billion yen ($5.10 billion) out of foreign stocks last week, reversing two successive weeks of net purchases. The MSCI World Index lost a sharp 2.54 per cent last week, the most in three months, pressured by a disappointing U.S. jobs report for July, and President Donald Trump's new round of punishing tariffs on dozens of countries. Despite the recent withdrawals, overseas stock markets have still received a massive 3.37 trillion yen worth of Japanese investments so far this year compared with a net 915.8 billion yen sales a year ago. They also sold foreign long-term bonds of 526.3 billion yen for the second successive week on the run. Meanwhile, Japanese stock markets saw approximately 193 billion yen in weekly net investments from overseas, the smallest amount in six weeks. In local bond markets, foreign outflows from long-term bonds cooled to a three-week low of 87.5 billion yen. Short-term bills saw 1.2 trillion yen of net foreign inflows after a net 1.95 trillion yen weekly outflow in the previous week. ($1 = 147.5800 yen)
Reuters
07-08-2025
- Business
- Reuters
Japanese investors ditch foreign stocks on US economic concerns, tariff tensions
Aug 7 (Reuters) - Japanese investors significantly sold foreign stocks in the week to August 2 as major markets retreated on caution over U.S. economic outlook and a new set of trade tariffs. According to data from Japan's Ministry of Finance released on Thursday, domestic investors withdrew a net 752.1 billion yen ($5.10 billion) out of foreign stocks last week, reversing two successive weeks of net purchases. The MSCI World Index (.MIWD00000PUS), opens new tab lost a sharp 2.54% last week, the most in three months, pressured by a disappointing U.S. jobs report for July, and President Donald Trump's new round of punishing tariffs on dozens of countries. Despite the recent withdrawals, overseas stock markets have still received a massive 3.37 trillion yen worth of Japanese investments so far this year compared with a net 915.8 billion yen sales a year ago. They also sold foreign long-term bonds of 526.3 billion yen for the second successive week on the run. Meanwhile, Japanese stock markets saw approximately 193 billion yen in weekly net investments from overseas, the smallest amount in six weeks. In local bond markets, foreign outflows from long-term bonds cooled to a three-week low of 87.5 billion yen. Short-term bills saw 1.2 trillion yen of net foreign inflows after a net 1.95 trillion yen weekly outflow in the previous week. ($1 = 147.5800 yen)
Bloomberg
30-05-2025
- Business
- Bloomberg
Korea Pension Confronts Sell America Vibe With Foreign Bet Boost
South Korea's largest pension fund plans to buy more foreign stocks, just as a 'sell America' trend fueled by the Trump administration's tariff agenda begins to take hold. The National Pension Service, which manages about 1,213 trillion won ($884 billion), set its 2026 overseas stock allocation target at 38.9%, up from 35.9% this year, according to a statement Thursday from the Ministry of Health and Welfare. The higher allocation equates to about $26.5 billion more of the NPS's current pot, according to Bloomberg calculations.
