Advertisement

Depositary receipt

A depository receipt allows investors to access overseas shares in their own market and currency.

A depository receipt allows investors to access overseas shares in their own market and currency. Rather than buying an overseas share direct and facing currency issues, plus the headache of trying to buy via an overseas broker, an investor can buy an American Depository Receipt (ADR) in dollars or a Global Depository Receipt (GDR) in sterling or euros instead. This is a separate piece of paper that represents the underlying shares, but is available in the investor's local currency and in their home market.

Advertisement - Article continues below

Typically, a bank will create the ADRs or GDRs by buying shares in the home market and then generating depository receipts according to a ratio say, ten shares to one ADR. An ADR investor then has similar rights to a normal shareholder the ADR can be traded like a share and will also pay dividends, assuming the underlying company offers them.

See Tim Bennett's video tutorial: Depository receipts: An easy way to invest in foreign firms.

Advertisement
Advertisement

Recommended

Visit/glossary/601570/real-exchange-rate
Glossary

Real exchange rate

The real exchange rate between two currencies combines the nominal exchange rate with the ratio of the price of goods or services in two different cou…
26 Jun 2020
Visit/glossary/esg-investing
Glossary

ESG investing

ESG stands for environmental, social and corporate governance, the areas in which good behaviour is particularly sought.
19 Jun 2020
Visit/glossary/601496/faang-stocks
Glossary

FAANG stocks

The acronym FAANG refers to Facebook, Amazon, Apple, Netflix and Google (Alphabet) – five American companies that have been among the top-performing s…
12 Jun 2020
Visit/glossary/technical-analysis
Glossary

Technical analysis

Technical analysts or 'chartists' attempt to predict future share price (or index) movements by looking at past movements.
5 Jun 2020

Most Popular

Visit/investments/property/601606/house-prices-crash-uk-property-prices-falling-where-next
Property

House price crash: UK property prices are falling – so where next?

With UK property prices falling for the first time in eight years, are we about to see a house price crash? John Stepek looks at what’s behind the sli…
2 Jul 2020
Visit/economy/inflation/601584/the-end-of-the-bond-bull-market-and-the-return-of-inflation
Inflation

The end of the bond bull market and the return of inflation

Central bank stimulus, surging post-lockdown demand and the end of the 40-year bond bull market. It all points to inflation, says John Stepek. Here’s …
30 Jun 2020
Visit/investments/stockmarkets/601611/nasdaq-all-time-high-markets-and-the-real-economy
Stockmarkets

How can markets hit new record highs when the economy is in such a mess?

Despite the world being in the midst of a global pandemic, America's Nasdaq stock index just hit an all-time high. And it's not the only index on a bu…
3 Jul 2020