ABC's of ETFs and ADRs

02/13/2004 12:00 am EST


An excellent educational panel on alternatives to foreign equities to gain global exposure, featured David Lerman of the Chicago Merc, and Rick Fortwengler of the NASDAQ. We also highlight the NYSE-listed foreign companies represented at The World Money Show.

"Why would we even want to invest overseas? Because we're not the only game in town," says David Lerman, of the Chicago Mercantile Exchange.  "A lot of people never go beyond the borders of the US. That's really a shame. There are great opportunities abroad. It's incredible. There is a lot of argument for international investing. And there are so many ways to do that. It's been made so easy. There are many products that have been launched so that anyone in the US can invest internationally. If you want to trade Malaysian stocks, you can do that in a heartbeat. If you want to play technology stocks in Japan, you can do that. If you want to trade Canada or Germany, you can. It's no longer difficult to invest abroad. The availability is there. I think in coming years, the US market can continue to do well, but there will still be other markets that blow us away, and there is no reason now why you wouldn't want to have some money over there."

Rick Fortwengler, managing director of financial products for the NASDAQ, adds, "There is no question that any investor should want to have a portion of their investments allocated to foreign markets. It only makes good sense. In this day and age, the world is getting smaller and smaller, with advances in communications and linkages between markets. The barriers are no longer there. And you have great companies overseas. From my own perspective, I'm a big fan of indexing. Investing in index funds overseas is a way to minimize your risks. Within the theme of indexing, are exchange traded funds, which trade just like stocks, and allow you to invest in various areas around the world. There are 46 domestic ETFs that allow you to invest internationally. At NASDAQ, we have a family of exchange traded funds called the 'BLDRs', which stands for baskets of liquid depositary receipts. These include four international funds- the Developed Markets BLDRs (ADRD NASDAQ), Emerging Markets BLDRs (ADRE NASDAQ), Europe BLDRs (ADRU NASDAQ), and Asia BLDRs (ADRA NASDAQ)."

Another popular method for US investors to gain exposure to foreign equities is through ADRs, or American Depositary Receipts. Through ADRs, many leading foreign stocks trade directly on the New York stock exchange, and can be bought and sold as easily as any domestic issue. Over 20 foreign firms, which trade via ADRs participated in the World Money Show, giving attendees the chance to learn about their global operations:

Canada-based Agnico-Eagle Mines (AEM NYSE) is a gold producer with mining operations in Northwestern Quebec. The company has established proven and probable reserves of about four million ounces of gold. Goldcorp (GG NYSE) operates in Ontario, while Canada's Kinross Gold (KGC NYSE) is the seventh largest primary gold producer the world. Harmony Gold (HMY NYSE) is South Africa's largest unhedged gold company. Companhia Vale Do Rio Doce (RIO NYSE) is the world's largest producer of iron ore.

South Africa's Sasol Ltd. (SSL NYSE) is an integrated oil and gas firm, using a proprietary technology for the commercial production of synthetic fuels and chemicals from low-grade coal and natural gas. PetroKazakhstan (PKZ NYSE) is an integrated international energy company, based in Canada with operations in the Republic of Kazakhstan. United Kingdom-based BP plc (BP NYSE) is the world's third largest international energy company. China Petroleum (SNP NYSE), as its name implies, is an oil and gas company in China.

National Grid Transco (NGG NYSE) is the United Kingdom's largest investor-owned utility and one of the world's largest utility firms. Endesa (ELE NYSE) and Enersis (ENI NYSE) are both based in Chile. Endesa is the largest power producer in Latin America, and Enersis is an electric utility. Netherlands-based Core Laboratories (CLB NYSE) is provider of reservoir management services used to optimize petroleum reservoir performance.  CEMEX (CX NYSE) is a global cement manufacturer, based in Mexico.

Deutsche Telekom (DT NYSE) is Europe's largest integrated telecommunications company and parent company of T-Mobile, the world's third largest wireless carrier.Tele Norte Leste (TNE NYSE) is a Brazilian telecom provider with the largest wireline platform in South America. Also based in Brazil is Ultrapar (UGP NYSE), a producer of petrochemicals and the fourth largest independent liquid petroleum gas distributor in the world. Braskem (BAK NYSE) is a Brazil-based petrochemical company.

Japan-based Nidec (NJ NYSE) is the leading manufacturer of small precision motors, with applications in digital technology. SAP AG (SAP NYSE) is a leading business applications software company, based in Germany.  India-based Wipro Ltd. (WIT NYSE) is a global IT firm providing cost-effective IT solutions and outsourcing services. Switzerland-based Novartis (NVS NYSE) is a world leader in pharmaceuticals. Sanofi-Synthelabo (SNY NYSE) is also an international pharmaceutical firm, based in France.

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