How does a person invest in stock markets in places like say, India and Africa? Do you seek out a trader there? Hire some kind of international trader here? Do only giant players participate in those kinds of trades? Are they the same markets local Indians or Africans are trading in? Do N American traders offer such services? Are the fees prohibitive? Do immigrants invest in their homelands?
I see stats for other markets a lot in my reading and it got me to wondering about these things, now I’m quite curious and don’t really know who to ask these rather naive questions.
I know you can look up quotes on a Bloomberg terminal but I don’t know about trading.
I asked my broker about this about a year ago. Specifically, why they didn’t offer international trading like on certain European markets for example. Their answer was that they weren’t liquid enough. Honestly that sounded like bullshit and I intimated as much but I didn’t have any evidence to the contrary.
It seems to check out. However that lists trades not volume of shares. NYSE and NASDAQ do billions of shares per day but I didn’t feel like trying to find stats for trades. However since we’re talking 4 orders of magnitude difference, I’m going to go out on a limb and say they were probably being straight with me.
I’m not sure I understand the difference. I pay both ways for US trades although to be honest, I just had to go check my trading history to confirm that since I tend not to pay attention.
Your almost certainly best off buying an ETF or mutual fund for that area from an American company. They are usually for a group of countries or individual country.
Vanguard has lower commission than ishares: unfortunately they don’t have single country funds and their international funds tend to cover a large set of countries. They do have an emerging markets fund though, as well as a Pacific one and a European one.
It was just a reminder to double the commission on the trade and double the foreign exchange commission when calculating the expense ratio. So for a foreign exchange commission of 1% for amounts under $100,000, figure you will pay at least 2% eventually. I’m not sure whether dividends would be subject to such exchange fees.
Your figure of “billions of shares per day” will include options, warrants and all other manner of derivatives. I don’t know how LSE reports it’s activity so can’t ID where the disconnect is but as a rough guess LSE would be 5-10% of the NYSE equity volume (one order of magnitude). London is the most international market in the world and liquidity in European stocks won’t be a problem.
As a comparison the Australian Securities Exchange (ASX) which is ranked 8th largest stock exchange (LSE is 4th) has averaged 900,000 equity trades, 550,000 option trades, 450,000 CDFs per day so far in Jun-13. friedo is on the money. If you want to trade on the LSE and your broker won’t allow you, get another broker. But trading in any off-shore market is much more involved than trading domestically e.g. regulations, tax implications, exchange rates, available information etc that depository receipts are often the best way to go.
You really think that London is an Emerging Market? :eek:
I’m in Mumbai, have some connections, are privy to some developments, have a hunch, listen to my cousin, whatever, I invest in some stocks on the Indian exchange. Let’s say they do well.
Now I immigrate to Canada. Do I divest? Do I keep the investments and the Indian broker? (Assuming I’m obeying all tax laws etc.) now that I’m in Canada my hard earned knowledge of that market is effectively useless to me? I can only invest via Emerging market mutual funds?
What if I was in Singapore or Malaysia? Can I only invest in those markets? Or could I then invest in the Indian or African markets or would I face the same complications?
No, why would you think any of that? You can invest in basically any market in the world from almost any country in the world. But it costs more. If you’re living in Canada lets assume most of your income and assets are in things denominated in Canadian Dollars, if you want to buy anything on a foreign exchange you have to go through a broker that has a seat on that exchange and your money also has to at some point be converted from Canadian Dollars into the currency used by the foreign exchange in question, and then back again whenever you sell and want your money back in your hands in Canada. Converting currencies imposes a small cost, but the real headache becomes all the different tax implications in the exchange country, your home country, tax implications on money you move overseas, move from overseas etc. It just gets complicated. If you’re willing to deal with more complicated transactions though, there is no reason at all you’d be shut out of foreign exchanges just because you lived in Canada.
There’s really nothing to it. If you want to trade in Japan’s markets, you just find a Japanese broker and deposit a bunch of yen in an account with the broker. The details of how to complete this transaction will vary by broker, but there’s probably some signatures and international wire transfers involved. Once you have yen in the account, you buy and sell Japanese stocks, receive dividends, etc. just like you do in a US account funded with dollars.
Of course, you open up a whole can of worms from a tax reporting standpoint, but the actual trading is simple.
There are international funds traded on a regular basis just like American stocks. For example, India Fund (IFN) and Indonesia Fund (IF). These funds are packages of traded stocks on the floors of those countries, and generally rise and fall with the stock markets of those countries. The trading commissions would be the same as any other stock through a US trading site.
For a great many foreign companies, as mentioned, they trade on American exchanges as ADRs. In that case, there’s really no reason for an American investor to trade on the foreign exchange. To see the variety of foreign companies trading as ADRs, you may peruse this site:
Indeed, there are probably quite a few people who’ve traded issues like Unilever (UL) on the NYSE, not ever realizing they were purchasing shares in a foreign company.
An interesting subset is a few very large foreign companies that trade on the American exchanges, but on the pink sheets. Nestles (PINK:NSGRY) falls into this category, as does Volkswagen (PINK:VLKAY). These companies do this because trading on the NYSE would require them to file with the SEC. By trading on the pink sheets they don’t have to. After Sarbanes Oxley was passed, a few large foreign companies took themselves of the NYSE and started trading on the pinks because they didn’t like the added complexity of the new accounting regulations.
If you’re trading rather than investing though, don’t you have to worry about the time differential? What I mean is, if something is traded mainly in Tokyo say, it’s price will move mainly with that market right? So if Tokyo tanks on Sunday night, you could have an ugly gap down on Monday morning. Something you don’t want to see if your a trader.
If you want to trade on the Tokyo market, you trade the hours that Tokyo is open.
So if you want to tell your broker to buy some stock in Panasonic (TOKYO:6752) when Tokyo opens on Monday, 24 June 2013 at 9AM, Sunday, you need to be on your phone before 23 June 2013 at 8PM New York time.
He may have been referring to purchasing the ADR on an American exchange. Yes, if you buy the Tata Motors ADR on the NYSE (NYSE:TTM), and overnight the underlying stock slides massively on the Indian market, you can expect TTM to open dramatically down on the NYSE in the morning.