Singapore investors now have a simpler way to invest in 5 mega-cap Hong Kong-listed companies. You’re sure to have heard of these counters, and should be an exciting addition to SGX: Alibaba, Tencent, BYD, HSBC and Bank of China.
The Singapore Exchange (SGX) launched Hong Kong Singapore Depository Receipts (SDRs) together with Phillip Securities on 30 October 2024. This comes on the back of 8 Thai SDRs listed on the SGX – in 2 launches from mid-2023.
We break down what SDRs are exactly, how they can benefit your portfolio, and how you can invest in the recently-launched Hong Kong SDRs.
Read Also: Investing In Thai SDRs: 8 Thai Blue-Chip Stocks That Singapore Investors Can Trade Through The SGX
What Are SDRs?
Singapore Depository Receipts (SDRs) represent part ownership in foreign securities. These securities are listed on overseas exchanges but are traded on the Singapore Exchange (SGX). Intermediaries issue SDRs and they do not have formal agreements with the underlying companies.
Each SDR corresponds to a specific number of underlying stocks and the owner of an SDR will have a beneficial interest in the company’s underlying shares listed on the foreign exchange.
Here’s a flowchart of how SDRs work:
Source: SGX
Benefits Of Singapore Depository Receipts (SDRs)
Investing through SGX Depository Receipts offers several advantages.
Firstly, it is cost-effective as you only need to pay local brokerage fees, eliminating overseas trading fees and foreign exchange charges. An investor’s capital outlay will also likely be lesser, allowing the investor to diversify their portfolio easily with the same amount of capital (the mechanism of how it works is shown later).
It is also convenient as you can trade and settle SDRs, enabling you to invest in Thai, Hong Kong and possibly stocks in other regions in future, in Singapore dollars (SGD) during SGX’s market hours through your local brokers.
The SDRs are securely held with the Central Depository (CDP), giving investors the comfort that their investments are safe. Since they are linked to CDP, you can receive dividend payouts directly into your Singapore bank account in SGD.
Furthermore, you still retain the flexibility to convert your SDRs back to the underlying shares if needed. To exit your investment, you can simply sell your SDRs on SGX or submit a cancellation request to take delivery of the underlying shares.
Investors can stay informed with corporate action announcements readily available on the SGX website, on top of the SDR issuer’s website.
Source: Phillip Securities
However, do note that you will not be eligible to exercise voting rights in respect of the underlying shares, unlike buying the shares outright on the foreign exchange.
Hong Kong SDRs Listed On SGX
After SGX did its maiden launch of SDRs with Thailand SDRs – it’s heartening to see more popular regional counters coming to SGX. Currently, there are eight such Thai SDRs, and there are now 5 more Hong Kong SDRs.
SGX’s new Hong Kong SDRs will allow investors to buy part ownership in well-known Hong Kong-listed companies of Alibaba, Tencent, BYD, HSBC and Bank of China, representing various sectors.
The table below shows the various Hong Kong SDRs together with their underlying shares ratio:
| Hong Kong Underlying SDR (HK SDR) | SDR Trading Name | Type of Business | SDR: Underlying Ratio | Board Lots |
| Tencent HK SDR (SGX: HTCD) |
Tencent HK SDR 10to1 | Diversified conglomerate including social media and gaming businesses | 10:1 | 100 units |
| BYD HK SDR (SGX: HYDD) |
BYD HK SDR 10to1 | Electric vehicle manufacturer | 10:1 | |
| Alibaba HK SDR (SGX: HBBD) |
Alibaba HK SDR 5to1 | China’s largest e-commerce platform | 5:1 | |
| HSBC HK SDR (SGX: HSHD) |
HSBC HK SDR 5to1 | Biggest Europe-based bank by assets | 5:1 | |
| Bank of China HK SDR (SGX: HBND) |
Bank of CN HK SDR 1to1 | State-owned Chinese multinational bank | 1:1 |
The Hong Kong SDRs can be identified by the following naming convention:
[Name of underlying company] HK [SDR] [Ratio of SDR to underlying securities]
For example, breaking down “Tencent HK SDR 10to1”:
- Tencent refers to the underlying company
- HK refers to the Stock Exchange of Hong Kong where Tencent is listed
- 10to1 refers to 10 SDRs representing 1 underlying stock
By investing in Hong Kong SDRs, investors can ensure they do not fork out high amounts of capital to invest in the underlying stock.
For instance, BYD on the Hong Kong stock exchange goes at around HK$294 ($50) per share. The stock is traded in board lots of 500 units there. Investors buying the Hong Kong-listed stock needs to cough up around $25,000 ($50 x 500) to gain exposure to the counter.
On the other hand, the same investor buying the BYD SDR in Singapore would only need to have a capital of some $500 (around $5 per SDR x 100) to start gaining exposure to the counter.
This allows an investor to diversify his portfolio and spread out his investments over many companies using the same initial capital.
Source: SGX
Get Access To Big Name Hong Kong Stocks Via SGX’s SDRs
Investing in the Hong Kong SDRs provides a straightforward and cost-efficient way to gain exposure to the dynamic stocks listed on the Stock Exchange of Hong Kong.
Whether you’re interested in the cutting-edge technology of Tencent or Alibaba, the growing electric vehicle industry with BYD, or the stability of established financial institutions like HSBC and Bank of China, the Hong Kong SDRs offer compelling investments for many investors.
If you would like to find out more about SDRs, do check out the SGX website.
The post Alibaba, Tencent, BYD, HSBC and Bank of China: 5 Hong Kong Stocks That You Can Invest On The SGX Via Singapore Depository Receipts (SDRs) appeared first on DollarsAndSense.sg.
