Investing in Emerging Market Stocks
Buying stocks in emerging markets has never been simpler. I recall when I first started investing in these markets. Buying shares in companies like Malaysia’s Sime Darby or Indonesia’s Semen Gresik required a number of phone calls, currency translations, and hefty commissions. But, it was worth it as few investors outside the local countries were buyers and, hence, there was the opportunity to buy long before many had access.
Today, many foreign stocks can be bought through traditional channels as U.S. banks have recognized the demand. Banks have issued depositary receipts (DR), which are a proxy for the shares traded overseas. DRs offer several benefits. They can trade in U.S. dollars if offered on U.S. exchanges, offer a market, pay dividends, and are tradable during market hours. Bank of New York Mellon is a great source for DR information as it is the largest sponsor of the program in the United States. However, there are things that you need to know about investing via DRs that will make the process easier.
If the DR trades on a U.S. exchange, it will say so on the list and will trade either on the New York Stock Exchange, the NASDAQ, the over-the-counter market, or Pink Sheets. If it trades on the NYSE or NASDAQ, a readily available real-time quote will be available. If it trades on the OTC or Pinks, you will have to get a quote from your broker. It’s always a better idea to first get a quote from the local market if it is open ...