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2800 or individual shares?

  1. #41

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    Quote Originally Posted by pin
    Yeah, I'm kind of with Aussie on this. I don't understand what you say
    Cendrillon is right and his example earlier is quite clear. What matters isn't the currency in which a stock trades, but in which currency the company generates its cash-flows. Cash-flows and currency in which they are generated is what drives the company valuation ultimately, not in which currency the stock is denominated.

    For example, Citigroup has a listing in USD on the NYSE (price USD68.79) and a listing in Frankfurt in EUR (EUR57.24).

    Does it matter which one you own ? No, because EUR57.24 is equal to precisely USD68.79.
    Last edited by jrkob; 13-09-2017 at 06:14 PM.

  2. #42

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    Quote Originally Posted by nivantj
    But then why would anyone invest in international stock in other currency when its available in local currency! Gives more flexibility in terms of liquidity.. I was thinking about stocks/other asset classes domiciled in that country which is probably the whole point of diversification! Regarding Brexit, i was thinking about investment done before something like that happens and somehow one is unable to get rid of it on time either due to not easily liquidable nature of asset or wait-game in anticipation of things might improve and all that which might cause major currency loss!
    I have an account in Europe and in the US.
    I buy the same stock at two different bourses and in different currencies.
    It saves me trading fees, e.g. buying in Frankfurt instead of buying from EU at NYSE, Which is also possible, I can buy in a few hours earlier, no need for currency conversions
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  3. #43

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    Quote Originally Posted by nivantj
    But then why would anyone invest in international stock in other currency
    What multiple listings (and consequently, generally, multiple currencies) offer is 2 kinds of convenience:
    1) invest in a company in a currency you already own. No need to convert.
    2) invest in an exchange closer to home, one you already have access to.

    For example, in my earlier example of Citigroup listing in EUR on the XTRA.

    A European will find it easier to invest in EUR on the XTRA because his local bank account already offers him access to XTRA stocks by default, while may be not to US stocks.

    I don't think there is any other reason, but...
    nivantj likes this.

  4. #44

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    Quote Originally Posted by jrkob
    What multiple listings (and consequently, generally, multiple currencies) offer is 2 kinds of convenience:
    1) invest in a company in a currency you already own. No need to convert.
    2) invest in an exchange closer to home, one you already have access to.

    For example, in my earlier example of Citigroup listing in EUR on the XTRA.

    A European will find it easier to invest in EUR on the XTRA because his local bank account already offers him access to XTRA stocks by default, while may be not to US stocks.

    I don't think there is any other reason, but...
    There are tax reasons of course... For example if we bought a European ETF listed in the US we would lose 30% of dividends for no reason. Buying the equivalent ETF in London would be much more effective.

  5. #45

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    Thanks cendrillon, example is clear

    I skipped over your message about multiple listing and commented on the first part of your sentence without reading the rest serves me right


  6. #46

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    Quote Originally Posted by cendrillon
    There are tax reasons of course... For example if we bought a European ETF listed in the US we would lose 30% of dividends for no reason. Buying the equivalent ETF in London would be much more effective.
    The primary place of issuance of a European stocks ETF would, in a natural way, be Europe. The sponsor may decide to have a US listing as well for the convenience of US citizens, but the different tax treatment would be a consequence of the dual listing, not a reason for it.

    What I think you have in mind are US stocks ETFs incorporated for example in Ireland and listed outside the US, in which case the better tax treatment is the reason for the dual listing, I agree. There might be others like these.

    I had in mind when writing US stocks listed in say... Frankfurt just as an example: their dividends are still withheld 30% and the reason for the dual listing isn't to avoid it.

  7. #47

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    Quote Originally Posted by aussie_oi_oi_oi
    Thanks cendrillon, example is clear

    I skipped over your message about multiple listing and commented on the first part of your sentence without reading the rest serves me right
    If we think a level deeper, if a company is based in the UK and has UK workers, and exports to the US, then a devaluation of the UKP will actual increase the value of the company, even when measured in USD, because it's costs go down.

    A company is really an asset like gold or oil. We can measure it's price in any arbitrary units we want but it's irrelevant. You can measure my height in centimetres instead of inches but it doesn't make me taller. It's just arbitrary units of measurement.

    With this in mind you can see how something like QE which devalued the USD caused US stock prices to inflate, in particular for exporters.

    If you want a real mind f&#k buy me a beer some time and I'll explain how stamp duty taxes on transactions for stocks and high frequency traders that scalp us actually are a net benefit for people who buy and hold even though they are taking money out of our pockets (hint: both stamp duty and HFTs depress PE ratios). In many ways it really is a zero sum game. It doesn't matter if you get screwed as long as everyone else gets screwed more.
    Last edited by cendrillon; 13-09-2017 at 11:26 PM.

  8. #48

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    Quote Originally Posted by TheBrit
    I would be cautious of analysis like this using simple ratios. The US and Chinese markets have very big composition differences, which explains part of this disparity. HSI has a lot of Chinese banks, which many people believe are essentially bankrupt and the low PER reflects the fact bank earnings are very low quality - they can essentially be made to be any number under the sun simply be adjusting bad loan provisioning. Likewise there are lots of other SoE's which are run for the benefit of the CCP rather than minority shareholders.

    You have Tencent but you also have a lot of utter dross that deserves to trade at low multiples because they don't earn good returns, the balance sheets are poor or they are simply run for the benefits of the CCP first, employees second, customers third and minorities not at all.

    Compare to the US where you have scores of strong companies, professionally run and much better disclosure and protection of minorities. There is also a strong argument that companies with stable earnings should trade at higher multiples than cyclical businesses for many reasons - the US has far more food, pharma and consumer companies than China/HK

    Anyway, simple PER comparisons neglect balance sheets( levered companies should be cheaper than unlevered companies) , consistency of returns (volatile RoE's should be cheaper than stable RoEs), capital allocation ability (companies that can profitability invest cash should be more expensive than those who can't), cash conversion (companies who generate cash in excess of accounting earnings should be more expensive than those that don't), growth runway (companies with plenty of growth ahead should trade on a higher multiple than those who have peaked out) etc etc. Many factors to consider, not just aggregate PER.

    Pretty much this. I'm deterred from buying the hang seng because there's a LOT of exposure to Chinese companies, banking sector, etc. I like tencent though, so I just bought that instead. Because tencent is so heavily weighted in the HSI, This is why the tracker has done so well.

    Also look at the HSI today. Yes it's done well... But it's only slightly above where it was in 2015. Meanwhile, the US market has performed much better and has more solid companies too.
    TheBrit and shri like this.

  9. #49

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    Quote Originally Posted by jrkob
    What multiple listings (and consequently, generally, multiple currencies) offer is 2 kinds of convenience:
    1) invest in a company in a currency you already own. No need to convert.
    2) invest in an exchange closer to home, one you already have access to.

    For example, in my earlier example of Citigroup listing in EUR on the XTRA.

    A European will find it easier to invest in EUR on the XTRA because his local bank account already offers him access to XTRA stocks by default, while may be not to US stocks.

    I don't think there is any other reason, but...
    For example, if you give in a buy order for a US stock in US then the limit price you can set is limited to last price less 30%.
    In Frankfurt I can speculate on an even lower price, give in an order once and then go on a long holiday.

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