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South African Depository Receipts (SADRs) are not actual shares of stock, but receipts representing shares. They are handled and traded just like shares. They offer the same economic, corporate and voting rights enjoyed by investors holding underlying shares directly. A SADR may represent one share, several shares or a fraction of a share, so its price may differ from that of the share it represents, but should still be reflective of the price. Depository Receipts have become a globally accepted, flexible instrument, enabling issuers to reach investors located outside their home markets while reducing the risk of cross-border investment, eg. foreign legislation, transaction costs and delays, currency exposure as well as complicated settlement transaction processes. Benefits to an Investor - Cross border investment flows are often complex, whereas SADRs offer a more convenient and efficient channel
- Trades and settles in the same manner as any other share available on the JSE’s Equity Market
- Global diversification is created by providing access to foreign companies, turning an investor's portfolio into a global one without having to go directly to foreign markets
- Enables comparison with other investments due to accessible price information
- Foreign investors can also trade in South Africa and repatriate their currency or securities abroad
- Traded in local currency – South African Rand
- Pays dividends and delivers corporate action notifications in South African currency and language
- Typical global custodian safekeeping charges for holding foreign securities are eliminated
- Ability to acquire the underlying securities
Some ConsiderationsLike dual/inward listed shares currently listed on the JSE, investors may face some degree of risk due to the unpredictability of economies and social situations which may positively or negatively impact the share price.How to Trade in SADRsOnce SADRs are issued, they are tradable on the JSE like other Equity Market securities, they can be freely bought from or sold to other investors, but are subject to exchange control requirements. The first essential step is to open a trading account with a chosen stockbroker. When investors want to buy or sell SADRs, they notify their broker. The broker can then buy or sell the SADRs in the South African market through an intra-market transaction.
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Learn more about South African Depository Receipts |
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