understanding financial jargon
Global Depositary Receipt (GDR)
These are a class of investment which allows international investors to own shares in foreign companies where the foreign market is hard to access for the retail investor, and without having to worry about foreign currencies and tax treatments. Global Depositary Receipts are issued by international investments banks as certificates (the GDR) which represents the foreign shares but which can be traded on the local stock exchange. For example a UK investor may be able to buy shares in a Vietnamese company via a GDR issued by a UK investment. The GDR will be denominated in GB Pounds and will be tradeable on the London Stock Exchange. The investment bank takes care of currency exchange, foreign taxes etc. and pays dividends on the GDR in GB Pounds.
The concept originally started in the USA with the creation of American Depositary Receipts which were created so that US retail investors could by shares in a foreign company without having to worry about foreign exchange, or foreign taxes.
It should be noted that although the risks of owning the foreign shares directly has been removed, there is now a risk of third party default, because the investment bank owns the underlying assets, and may not be able to pass on the benefits to ADR holders if they get into financial difficulty.
What to do if you need more help
If you need more help with your specific commercial loan, mortgage or insurance requirement please speak to a professional financial adviser.
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