There are many times when foreign stock markets offer more opportunity for profits than markets in the USA. But how do you trade foreign stocks? If you are fluent in Portuguese you could convert dollars to Brazilian reals and trade on the Ibovespa. Or you could learn Spanish and convert dollars to pesos and trade on the Mexbol in Mexico. Or you could trade foreign stocks by just staying home and trading American Depository Receipts of foreign stocks.
What Is and American Depository Receipt?
According to Investopedia an American depository receipt or ADR is
A negotiable certificate issued by a U.S. bank representing a specified number of shares (or one share) in a foreign stock that is traded on a U.S. exchange. ADRs are denominated in U.S. dollars, with the underlying security held by a U.S. financial institution overseas. ADRs help to reduce administration and duty costs that would otherwise be levied on each transaction.
When you trade foreign stocks via an ADR you can buy and sell denominated in US dollars. American depository receipts are available on the NYSE, NASDAQ and AMEX as well as over the counter.
Where Are the Profits Most Likely?
Third world markets took a hit after the 2008 market crash and subsequent recession. And they are likely to rebound in fits and starts as the world economy heals itself. There are good opportunities for long term investment in the ruins of the worst recession in three quarters of a century and there will be stocks that show promise but fail to meet expectations. The beauty of trading stocks is that the trader can profit if the stock goes up and if it goes down. The BRICS nations seemed ready to rise to the first rank economically until the recession hit. Now Brazil, Russia, India, China and South Africa are all having problems, which mean opportunity for anyone who wishes to trade foreign stocks. If you are going to trade foreign stocks you will need to study them. As an example, if you want to trade stocks from India you may want to read moneycontrol.com, which include Indian stock market recommendations. For example, Sanjay Dutt of Quantum Securities is quoted as saying that
The rally in midcaps is not over yet, despite the sharp correction. Dutt says he is incrementally positive on the market and sees the major benchmarks retesting their recent highs.
Picking Markets and Picking Stocks to Trade
Volatile markets tend to be profitable markets if traded properly. However, if you trade foreign stocks you need to trade stocks and not markets. And the stocks should be level I or II ADRS. These American depository receipts are subject to the same disclosure requirements as American stocks listed on the American stock exchanges. An all too familiar problem when you trade foreign stocks is that many foreign markets are far from transparent. Thus you can get blindsided all too easily. This is less likely to happen with the highest level ADRs as these companies are subject to the same SEC rules of disclosure as other stocks on the NYSE, NASDAQ or AMEX. If you want forego learning Portuguese and still trade Brazilian stocks take a look at TopForeignStocks.com for a full list of Brazilian ADRs.
The Full List of Brazilian ADRs: The Brazilian ADRs trading on the US Exchanges as of Jan, 2014 are listed below:
The list includes 90 Brazilian stocks trading as ADRs.
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