Benefits
Be a step ahead
ADR used to only be available for trading during US hours. With the launch of ADR on GlobalQuote, you can now be a step ahead and buy-sell these companies before the US market opens for trading.
Round-the-clock trading
Because ADRs traded in Singapore are the same ADRs traded in the US, you can freely transfer your ADR between your account in The Central Depository (Pte) Limited (CDP) and your account in the Depository Trust & Clearing Corporation (DTCC) in the US.
You can hold your ADRs in either depository and will still be able to buy-sell in both Singapore and US exchanges. This way, you can almost trade round-the-clock.
Simplify international trading and investing
An ADR makes it easy to buy and hold securities of an overseas company, without needing to open a separate overseas trading account, put up foreign currency capital or pay foreign custody fees, or worry about unfamiliar trading, settlement or tax practices in other countries.
Eliminates investment barriers
There are markets that have capital controls and foreign ownership restrictions, thus making it difficult for overseas investors to invest directly in such markets.
Through an ADR, you can trade and invest in companies from such markets using your Singapore securities trading account, similar to buying and holding Mainboard-listed securities.
Risks
International investing risks
- Investing in ADRs is subject to market, country (including but not limited to capital market controls / restriction imposed) and company-specific risks
- Possible gains / losses from foreign currency translation
- ADR status does not insulate a company's stock from the inherent risk of its home country's political stability
- Price of an ADR may not always track the price of the underlying common share in its overseas market
- Investor protection and recourse
Single-listed ADRs investment risk
ADR holders may be exposed to the risk of holding unlisted shares should they surrender their ADRs.
Risks of investing through Global Quote
- ADRs quoted on GlobalQuote are not subject to the listing requirements of the SGX-ST
- Holders of ADRs in CDP will not be able to vote through CDP, unlike direct holders of ADRs listed on the US exchanges
- Holders of ADRs through CDP will NOT be able to receive non-cash entitlements (e.g. rights issue, bonus shares, and other non-cash offers)
- Potential losses arising from dequotation from Global Quote
- Potential losses arising from trading halt in ADRs quoted on GlobalQuote
Liquidation and receivership risks
In the event that the underlying company is in liquidation or winding-up or placed under receivership, there is no assurance that holders of ADRs will be able to enforce their right of claim and that holders of ADRs may lose their entire investment.
Risks related to parties involved in ADRs
- Greater counterparty risks when you invest in ADRs than when you invest in SGX-listed shares
- Limitations on ADR conversion as the depositary bank may close its transfer books at any time or from time to time when it deems expedient in connection with the performance of its duties
- Depositary bank or its custodian could end up in financial difficulty, and ADR holders may lose their entire investment
- Limitation on obligations and liability of issuer and depositary bank
- Holders of ADRs may face administrative difficulties or may not be able to take legal action against the issuer or the depositary bank in the US should there be a breach of terms in the deposit agreement by the parties
Selected information was taken from the Singapore Exchange.
