The other day I mentioned that the Bank of NY ADR site listed a bunch of New Zealand ADRs. I am somewhat familiar with quite a few of the names and was pleased to see that there were pinksheet ADRs which tend to be easier trade that the ordinaries. I also mentioned that the half dozen or so that I looked at showed no volume so I was not sure if the information was accurate.
New Zealand holds some investment appeal because it tends to be on a different economic cycle than the US and has some unique attributes. Long time readers will know my fondness for the country as an investment destination even though I've had clients out for about three years.
Curious about the list of ADRs I called Schwab's global desk to see whether the information in the Bank of NY ADR site was accurate. Well, apparently not. Not exactly anyway. I only asked about a couple of them and in each instance there was effectively no ADR. Yes the symbol existed but there had been no trades for years and when you do a name search on a Bloomberg Terminal in this context the ADR will be listed in the search results, if there is one, and in the case of the two I asked about; no dice.
As a followup I asked about buying ordinary shares for one stock in particular. The number of shares I would need to buy for an across purchase exceeds the average daily volume in the NZ market. This makes getting in difficult and could make getting out impossible.
These are generally trade-able in small amounts. Owning a couple of stocks like this at 2-3% each in amongst other more liquid holdings is would very likely not be a hindrance but clearly not for everyone.
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7 comments:
Not sure what volumes you might be talking about, but if they are that thin why expose yourself to that liquidity risk?
Unlike the big banks, you don't really get to mark-to-maturity and hope the fed bails you out. If you can't get rid of them, their effective mark is zero.
Surely there must be another way to get similar NZ exposure.
You are to focused on diversity. I know it is a good thing.
But giving up reasonable liquidity?
what is wrong with accepting what is available and simply buying into etfs that actually exist? Singapore? Malaysia? I know they are not new zealand, but again I like to fill my portfolio with GOOD LIQUID equities I can actually trade.
Roger, expenses associated with foreign shares are also considerably higher than for stocks listed on US exchanges. I tried to buy a pink sheet stock domiciled in Canada last month and was surprised to learn that there was a $65 foreign exchange closing fee (the symbol did end with an F); fortunately, I guess, my offer was too low and I canceled the order a couple hours later. I have considered, but not yet acted upon, opening an Interactive Brokers account which, according to their website, provides real-time access to a great many local exchanges/markets around the world (New Zealand is not on the list, however). Have you considered an IB account?
Thanks,
JCarr
EWA is a nice proxy for New Zealand...
I share your frustration at the difficulty of getting into these niches.
Here's a couple of tips you might find useful, though:
1. When I know the name of a company I'm interested in, I go not to Bloomberg but to Reuters:
http://www.reuters.com/finance/stocks/stocks
There you can enter the name of the company and get ALL the tickers it trades under in developed markets. Often there are 2 or 3 pink sheet issues in the US.
2. Given a pink-sheet ADR, go to http://www.pinksheets.com/pink/index.jsp
and you can immediately access all the trade information, find out which tickers are active, AND link to the company's home page (usually) and financial reports.
That's much more appealing to me, anyway, than calling the Schwab foreign desk with a lot of questions.
I would like to hear more about other brokers who might provide access to ordinaries on foreign exchanges, if anyone knows.
Off topic.
I have been pondering a fixed income (dollar and world currency) portfolio divorced from my other holdings that assumes moderate risk and is international in scope. Any general thoughts on this?
T
T,
I don't typically look to fixed income as a way to take on risk, more like to dampen risk. That being said I do use foreign debt and expect to add more over time.
I would suggest sorting out whether you want to simply diversify out of some USD exposure or weight to some narrower outcome like the end of war in Sri Lanka (picking an example that only Jim Rogers would seem to be following).
The answer to that would dictate how you go about it.
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