WHAT ARE THE BENEFITS?
In general, analysts said the SDRs have made it more convenient for investors in Singapore to gain exposure to overseas stocks.
This is especially the case for Thai SDRs, given how there are fewer platforms that offer access to trading in Thai stocks, said Mr Wong.
The costs are also lower, with investments done in Sing dollars and through local brokerages which means saving on overseas trading fees and foreign exchange losses, Ms Lee said.
In the case of the Hong Kong SDRs, the biggest differentiating factor is giving investors “increased accessibility to Hong Kong companies with a fraction of the capital needed”, said Mr Amir Hamzah Abdul Razak, director of investment advisory at iFAST Global Markets.
For instance, given BYD’s trading price of HK$258.2 as of Jan 2, an investor buying the actual shares would have to put in around S$22,605 (US$16,600) for the minimum board lot size of 500 shares.
But an investor would need to fork out only about S$455 as the minimum investment in the BYD SDR, which trades in board lots of 100 units. This is about 2 per cent of what is originally needed to invest in the Hong Kong stock.
“While it wouldn’t have been difficult for an investor in the past to buy into Hong Kong shares, what this has done is to effectively bring down the minimum investment cost so that investors can access some of these companies in a bite-sized manner,” said Mr Wong.
WHAT DO INVESTORS NEED TO TAKE NOTE OF?
As with all investments, investors need to consider their risk appetite, investment preferences and objectives, as well as do their own research to understand the companies they are investing in.
For example, the Thai SDRs represent a wider range of industries, ranging from tourism, financial, oil and gas to consumer goods. Together, they make up more than 40 per cent of the benchmark SET50 Index, which tracks the price movements of the top 50 stocks listed on the Thai market.
But compared with other markets, it is one that most local investors are less familiar with, said Mr Amir.
