Foreign Markets

Even though the Chinese economy has slowed it is still growing at more than twice the rate of the USA or EU when the two largest world economies are having a good year. This fact alone makes trading foreign stocks in China an attractive alternative to US stock investing. When an investor uses American Depository Receipts of Levels II and III he is assured of the transparency he is used to when evaluating US stocks. As with all investing and trading one needs to develop a strategy consistent with the market and individual stocks. For example, a viable strategy in China may be to look for growth stocks. In Europe an investor may decide to assess stock volatility as the Euro raises and falls as the Eurozone deals with a slow economic recovery and suddenly cooler relations with the Russian Federation over issues in Ukraine. If companies in Europe, such as Siemens, have substantial sales outside of the Euro Zone they may continue to have a strong balance sheet even if the Euro falls. Thus a trader could look for a stock in the Euro Zone with a high price to earnings ratio. He could follow via Candlestick patterns as well as quarterly reports and news about the Euro. In the periods of market inefficiency that follow changes in fundamentals, such as a debt default in Greece or Italy, he could profitably buy stock, sell stock, sell short, or profit from buying options as Candlestick signals indicate.

Clear and Accurate Information

When trading foreign stocks on a foreign stock exchange getting accurate and up to date stock information is often a problem. This is especially an issue if you do not speak the language! This is where American Depository Receipts are especially useful. The level II and III ADR’s are regulated by the Securities and Exchange Commission and provide periodic and accurate reports of their plans and financial condition. Because these foreign stocks trade as US stocks do on the NYSE or NASDAQ they trade during regular US business hours. Using Candlestick pattern formations and Candlestick trading tactics a US trader can trade European or Asian stocks and take advantage of the growth and volatility that often leads to short term investment profits.

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Picking a Foreign Stock

There are two general routes when investing in foreign stocks. One is to look for a market that is likely to grow. If you believe that you can make money by investing in Latin America you may look for stocks issued in Brazil or Mexico. A viable choice might be oil stocks, especially in Brazil as recent oil finds bring its reserves to the level of Saudi Arabia. Using the theory that a rising tide raises all ships, you believe that the more important factor is the strength of the emerging market more so that the strength of the individual stock. The other route is to look for individual companies that are strong in their nation of origin and, perhaps, are exporters of goods and services to the world. In this case, issues such as a fall in currency value in a nation may be helpful both in making a stock cheaper to buy and in making the underlying company more competitive in world markets. A company like Siemens comes to mind if investing in foreign stocks in Europe is something that interests you. At times when the Euro is weaker the stock may be a bargain. At the same times Siemens’ products and services may sell better across the globe because they will be more price competitive.

Tracking Foreign Stocks

A level 3 ADR is the most secure for an investor. These companies must adhere to the strictest set of rules when offering stock in the USA. They are issuing stock to raise capital in the USA and must adhere to SEC rules consistent when what US based stocks must do. Fundamental analysis of level 3 ADR’s is easier because of the English language materials which the company must furnish investors.

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