ANOTHER STOCK YOU ARE 100% SURE TO LOSE ALL YOUR MONEY IN!!!!
Yes, another stock that if you are so stupid to invest in it, then you deserve to lose all you money.
Instead of boring legal disclaimers that tell you that you can't sue me if you invest in any company I discuss, I figure it's best just to tell you NOT to invest in the stock because it's insanely risky and you're most likely going to lose your money. Actually, scratch that, you are CERTAIN to lose money. Even if you short it, you'll lose money. And if we were to be legally technical about it, if you (for some unknown reason) MAKE money on this stock, then I can sue you!
Glad we got the legal stuff out of the way. Let's move on.
So I would have liked to invest in this stock long ago (because I love to lose money).
Unfortunately there's some damn SEC rule that you can't buy a stock if it goes public in foreign markets for 45 days. Bastards. For this is what's happened to the stock price;
Now what you'll notice is that it's listed on the Hong Kong market and their ticker symbols consist of numbers, not letters.
The only problem is that if you have a standard online US brokerage account, you can't trade in foreign exchanges.
So after much research and inquiry I finally found its counterpart traded on the OTC.
What is most interesting is the drastic difference in volume. On the HK market volume is consistently in the multiple millions, whereas here in the US it's only a mere fraction, very low volume.
Another tidbit of information is that this is the Industrial and Commercial Bank of China. Now the 2nd largest bank by market capitalization (I think) AND it was the largest IPO ever.
This behooves the question why volume isn't higher for its US counterpart on the OTC.
And I have a simple, but hard to believe conclusion, unless some of you traders could perhaps provide a little more insight;
A US equivalent to trade in is so damn hard to find that ultimately would be investors become discouraged, give up look, thereby denying this stock additional liquidity. I theorize how much the stock price would go up based on additional liquidity hitting the market if it wasn't such an expedition to find the darn ticker symbol.
3 comments:
Very good explanation. With globalization, I think stock should be freely trade across the entire earth. Liquidility is key.
Actually, IDCBF is traded on the pink sheets, which basically have no filing requirements. There are two types of foreign stocks that trade on the pink sheets, denoted by the 5th letter in their symbol - a 5th letter Y is an American Depository Receipt(ADR) and they can either be sponsored(created by the company) or unsponsored(created by brokers). An example of a sponsored ADR would be Nestle(NSRGY). The second type is one like IDCBF with the 5th letter being an F - they are unsponsored and sort of a 'grey-market' stock, as the brokers need to go to the home market of the company to purchase the shares. Also, I believe the volume reporting is a little screwy on F stocks. It does appear the multiple millions crossed on the pinks a couple of weeks ago though.
In this case, it's tough to tell what the case is, because the F chart doesn't correspond to the home market chart very well, but that's not surprising because IDCBF only trades by appointment(seldom) from the looks of it, and the chart may only reflect the last trade or closing spread, so the last quote may be days old. Also, with a pegged currency like the yuan, it would appear that IDCBF should trade at roughly $2 based on the exchange rate, so it looks to me like a sizable liquidity discount, which isn't uncommon in issues such as this. Unless it's a sponsored ADR or a well-known company, these stocks are more of a 'greater-fool' play.
However, it is somewhat surprising that there doesn't appear to be any arbitraging going on between the two, given the liquidity in the home market.
I also noticed some disparity between the H-shares of ICBC traded in HK and the A-shares traded in Shanghai.
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