24-Hour Trading, Asian style

In October 2010 Singapore Exchange (SGX) began trading the American depositary receipts (ADRs) of 19 Chinese companies on a new board called GlobalQuote.

The goal was twofold: to allow Asian investors to trade ADRs during their own working day, rather than only during New York trading hours; and to offer Asian investors exposure to stocks not listed in Asia, such as Suntech Power Holdings.

Nine months later, how is the new platform performing? ‘In the weeks after the launch, trading was focused on ADRs of firms with a primary listing in Hong Kong,’ explains a spokesperson for SGX.

‘In recent weeks, however, trading in the ‘single-listings’ such as Baidu.com has picked up, showing growing investor acceptance of the GlobalQuote platform.’

That acceptance has been generated by several advantages for GlobalQuote investors. First, they can trade on Asian news ahead of the US market open and with ample liquidity all day, helped by the fact that there is full fungibility between ADRs on GlobalQuote and both the ADRs on US exchanges and the common shares in overseas markets.

Trades are also denominated in US dollars and are cheap: there is a S$10 ($8) flat fee per transfer between Singapore and the US, and trades are free of stamp duty or any other kind of sales tax. Better still, there’s no conversion fee to transfer ADRs between the US and Singapore.

Trading on GlobalQuote is healthy, as SGX notes: ‘Some of the ADRs are gaining significant market shares versus the primary ADR market in the US.’ (See ADR trading volume, below.)

But SGX has bolder ambitions: ‘We expect to expand the ADRs available on GlobalQuote to those of firms from all over the world, thereby providing investors with their first access to these companies during Asian hours.’

SGX took a step in this direction last week, when it announced it was set to add another eight ADRs to GlobalQuote.

[Article by Janet Dignan, IR magazine]