Hi Ramsey:
Thanks for your appreciation.
I have also been looking at Asian countries' equity, especially, the Asian ADRs. There are two risks in the ADRs. One is obvious: the exchange rate risk. The other one is not so obvious: the premium (like options) built into some of these ADR prices.
For example, Korean ADRs (KEP, PKX, SKM) have ~100% premium built into their US$ prices. That is, at the current exchange rate (US$/won), one can buy twice the number of shares in Korea Stcok Exchange as the ADRs here for the same amount of US$. This means, one is unlikely to get the same appreciation in the value of these ADRs as the stocks in Korea would in the long run as the won becomes more stable. In the short-run, however, there may be euphoria/panic and so it is hard to predict how the ADR price will move vis-a-vis the underlying Korean stock. I would like to have your as well as others opinions on these ADRs.
Indonesian ADRs (TLK, IIT) have no premium. But, this could be because of more political risk in Indonesia, making the perceived risk in the rupiah higher than that of the won. But, the Indonesian ADR prices move almost in sync with the rupiah/US$ exchange rate and the local rupiah price of the underlying stock.
I have not looked at Malaysia and Thailand. I would like to have your opinion.
Sankar |
