Tokyo to London: How ADRs Bring International Stocks to Investors in the U.S. Market

ADRs (American Depositary Receipts) provide investors in the US market with an easy way to gain exposure to foreign stocks without dealing with the complexities of foreign markets. Managed by U.S. custodian banks, ADRs are listed on major U.S. exchanges like Nasdaq and NYSE. They represent American Depositary Shares (ADS) that offer similar rights to common stocks, including ownership and dividends.

Dividends are paid per ordinary share, meaning that if the dividend to be paid is $0.50 per ordinary share and the ADR ratio is one (1) ADS for two (2) ordinary shares, the total dividend paid to the shareholder in the American market would be $1.00 per ADS.

Foreign companies use ADRs to reach U.S. investors, enabling them to diversify their portfolios with international investments. On platforms like EasyEquities, investors can explore various ADRs that trade at a defined ratio, ensuring ownership of a specific amount of ordinary shares per ADS.

Some examples of ADS available on EasyEquities include:

• Haleon Plc: A consumer healthcare products company; each ADS represents 2 ordinary shares.
• Barclays PLC: A global investment bank; ADR ratio is 4 ordinary shares per 1 ADS.
• GSK Plc: A pharmaceuticals and vaccines company; each ADS represents 2 ordinary shares.
• Shell PLC: A global oil and gas company; each ADS represents 2 ordinary shares.
• Rio Tinto Plc: A global mining company; each ADS represents 1 ordinary share.
• Alibaba Group: A global e-commerce and technology company; each ADS represents 8 ordinary shares.
• Tencent Music Entertainment Group: Music streaming service; each ADS represents 2 ordinary shares.
• JD Group: E-commerce and logistics company; each ADS represents 2 ordinary shares.

Furthermore

• Baidu Inc - Spon ADR: 1 ADS = 8 Class A ordinary shares
• Ericsson: 1 ADS = 1 ordinary share
• Nokia - 1 ADS  = 1 Ordinary share
• NetEase Inc - ADR: 1 ADS = 25 ordinary shares
• NIO Inc - ADR: 1 ADS = 1 Class A ordinary share
• Vodafone Group Plc - Sp ADR: 1 ADS = 10 ordinary shares
• Weibo Corp ADR: 1 ADS = 1 Class A ordinary share
• Honda Motor Co ADR: 1 ADS = 1 share
• Toyota Motor ADR: 1 ADS = 10 ordinary shares
• HDFC Bank Ltd ADR: 1 ADS = 3 ordinary shares
• Vipshop 5 ADS = 1 ordinary share
• XPeng Inc. 2 ADS = 1 Class A ordinary share

Investors can transfer funds to the U.S. market via EasyFX by navigating to My Funds and then Transfer. Transfers done on weekdays before 11:30 a.m. typically reflect the same day.

While the ADS-to-common stock ratio is usually one-to-one, investors face risks from foreign exchange fluctuations, which can affect the value of dividends and stock prices depending on the strength of the U.S. dollar against the foreign currency.

Despite these benefits, there are potential drawbacks, such as liquidity risks if demand for ADS is low. Low trading volume may hinder the foreign company's ability to raise capital in the U.S. market, emphasising the importance of investor interest in the success of ADRs.

Investing in dividend-paying shares could offer numerous financial benefits, such as passive income. Additionally, several of these shares can also serve as valuable collateral for a loan on EasyEquities.

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