ADR Forum

vikas72 · Joined: 21 Dec 2007 Posts: 651

Many people have questioned about American Depository Receipts. In this section I will comment about what is American Depository Receipt, with special reference to Indian Depository Receipt.

An American Depositary Receipt is alo called ADR in short. It represents the ownership in the shares of a foreign company trading on US financial markets like NYSE. The stock of many non-US companies like companies fom India, China, Mexico trade on US exchanges through the use of these ADRs. An Example is Infosys from India.

So what is the advantage of ADR ?

These ADRs enable US investors to buy shares in foreign companies.

We can invest in ADRs without undertaking cross-border transactions. ADRs carry prices in US dollars, pay dividends in US dollars, and can be traded like the shares of US-based companies.

For example you know Infosys is a good Indian company. But you could not have invested directly in US stock market had Infosys not been and ADR. Not all Indian companies have ADRs only a small list of Indian companies have ADRs listed in US.

Each ADR is issued by a US depository bank usually represent a fraction of a share, a single share, or multiple shares of foreign stock. An owner of an ADR has the right to obtain the foreign stock it represents, but US investors usually find it more convenient simply to own the ADR.

There is a history of price difference in the stocks price in original country and the ADRs. Usually the price of an ADR is close to the price of the foreign stock in its home country.

The first ADR was introduced by JPMorgan in 1927, for the British retailer Selfridges&Co. The largest depository bank is the Bank of New York Mellon.

Any question ?

vikas72 · Joined: 21 Dec 2007 Posts: 651

The list of the Indian ADRs can be found here.

http://www.diggsamachar.com/indianadrs/

The list of the Chinese ADRs are here

http://www.diggsamachar.com/chineseadrs/

naha · Joined: 17 Nov 2007 Posts: 296

It is always good to diversify portfolio in internaional market. However, it becomes imperative that you have the knowledge of the international geography, international finance and most importantly feel of the pulse of the country to be successful.

Otherwise, investing in an international market is as risky as home market.