clarify ADR with ref to stockmarkets and the significance t o the scrips?

whenever you watch the popular stock market channels like NDTV profit, you may observe a separate box displaying the ADR of major scrips.Sometimes the figures are negative,sometimes positive.I would like know the influence of this figures on the performance of the market.Can anybody able to kindly enlightewn on this?

1 Answer

  • 1 decade ago
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    ADR stands for American Depositary Receipt.

    Some very large locally traded stocks decide to list some shares on the New York Stock Exchange or NASDAQ. They do that by going to one of the big banks (like JP Morgan) and getting them to set up a ADR trading programme.

    One ADR might be worth the same as 4 local shares and trades in US Dollars. By setting up an ADR programme the company is encouraging American investors to buy into their company by allowing them to buy in their local currency and removing foreign exchange risk. If more investors buy in it should drive up the stock price for everyone.

    If you see a negative figure on the screen it means the ADR price is going down, if you see a positive price it means the price is going up. The only impact on the market is that the price of the ADR will likely drive the price of the locally traded stock. If gthe ADR is falling, it means the local stock will probably fall as well.

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