Investing In American Depository Receipts
As
many of you likely know, there are a host of challenges when a trader
forms an interest in buying shares in companies from foreign counties.
In many cases, it is impossible to gain exposure to the biggest names
unless the trader has filled out proper documentation or has an account
in the given country. (For more, check out Investing Beyond Your Borders) Luckily, the invention of exchange-traded funds and American Depositary receipts
have changed the game for the average trader. For those who don’t know,
an exchange-traded fund is essentially a basket of stocks similar to a
mutual fund. An ETF trades on the major U.S. exchanges like a regular
stock. The details for picking the components and how the fund is
structured are left to a manager. The other tool known as an ADR is
becoming more popular and is essentially a security that represents
shares of non-U.S. companies that trade in the U.S. financial markets.
For those who don’t follow the PowerShares India Portfolio ETF (PIN),
you’ll be interested to learn that fund holds 50 positions in
securities that comprise American depositary receipts and foreign shares
of 50 of the largest Indian stocks listed on the two major Indian
exchanges. The ETF carries a 0.82% total expense ratio and consists of
companies in sectors ranging from energy, information technology, health
services, financial services, consumer products, heavy industry and
more. It may prove beneficial for traders to examine the top five
holdings of PIN shown below in order to create a watch list of potential
investment candidates.
Company
|
Weight (%)
|
Reliance Industries Ltd.
|
9.42
|
Infosys Ltd. (INFY)
|
8.96
|
Oil & Natural Gas Corp.
|
8.87
|
HDFC Bank Ltd. (HDB)
|
5.89
|
Tata Consultancy Services Ltd.
|
4.62
|
A Closer Look At The Top Holdings
Most
of the holdings shown in the table above trade on Indian stock
exchanges and can be difficult for the average U.S. trader to invest in.
However, the strength and quality of the names in the table is one of
the reasons why exchange traded funds such as PIN are becoming the go-to
tool of choice for investing in foreign countries such as India. If a
trader wants to place an even more specific bet on Indian stocks then
ADRs such as INFY and HDFC could be worth a closer look.
|
Δεν υπάρχουν σχόλια :
Δημοσίευση σχολίου