The appetite for foreign stocks among U.S. investors is high since last year despite the credit crisis and the current recession.Last year’s market performance proved that the so-called decoupling theory of emerging markets being different from the developed markets is not entirely correct. In fact,many of the emerging market indices such those in Russia, India, Brazil, China actually fell much more than the developed market indices.
U.S. investors’ attraction towards overseas stocks started increasing after the dot-com bubble burst.These investors hold foreign stocks for a variety of reasons like diversification, high dividend yields,explosive growth in emerging markets,etc.The interest in foreign company stocks via American Depository Receipts (ADRs) continued thru the crisis last year.According to Bank of New York Mellon’s ADR site over 735 New Depositary Receipt Programs from around the world were introduced between Oct. 1,’08 and Aug.17,’09.The majority of these companies were listed in the OTC markets.Some of the well-known companies listed in the OTC markets include: Credit Aricole(CRARY) and Careefour (CRERY) of France, Linde (LNAGY) of Germany,Konica Minolta(KNCAY) of Japan,Standard Bank(DBGOY) of South Africa.The 735 ADRs have very thin daily trading volumes since they are new and are not listed in the organized exchanges.
Four foreign stocks were listed in the New York Stock Exchange this year (Source: The Bank of New York Mellon DR Directory). Lets take a quick look at these four companies.
1.China-based Chemspec International Limited (CPC) is a contract manufacturer of specialty chemicals. The ADR effective date was June 24, 2009. The current market cap is $246M and the company pays no regular dividends. Total sales in 2Q,2009 was $34.2 M, an increase of 8.1% from 2Q,2008. Net Income amounted to $7.9M. Chemspec holds US$69.3 million in cash primarily from the proceeds of IPO.
2.Duoyuan Global Water(DGW) is a domestic water treatment equipment supplier in China. “The Company’s product offerings focus on addressing the steps in the water treatment process, such as filtration, water softening, water-sediment separation, aeration, disinfection and reverse osmosis. It offers a set of more than 80 complementary products across the three product categories: Circulating Water Treatment Equipment, Water Purification Equipment and Wastewater Treatment Equipment.” Since pollution is a major problem in many Chinese cities Duoyuan may be a good pick. Since its June launch, DGW is up more than 50%. The stock closed at $30.42 last Friday. The P/E ratio is 78.81.
3. Denmark-based fixed-line telecom services provider Invitel(IHO) started trading in New NYSE Amex in late February. Invitel has operations in Romania thru its subsidiary Euroweb Romania. The company provides its services to about 17% of population in Hungary. IHO is down 23% since its IPO. “Invitel Holdings’ net income attributable to ordinary shareholders for the quarter ended June 30, 2009 was EUR 16.7 million, or EUR 1.00 per ordinary share”.
4.Votorantim Celulose e Papel(VCP) is a pulp and paper products company based in Brazil.The company also makes wood-free printing and writing papers and specialty papers. VCP is up 114% YTD. Votorantim has 390M shares outstanding and the beta is 2.9.
