Singapore Exchange Limited (SGX: S68), or SGX, has been steadily growing its slate of Singapore Depository Receipts (SDRs).
SDRs provide investors with more efficient access to overseas markets, and SGX has linked up with the Thai and Hong Kong stock exchanges for its SDR launches.
Just two months ago, in June, SGX expanded its SDR slate with the addition of six new Thai and Hong Kong stocks.
These additions brought the total number of SDRs to 21, split between Hong Kong (11) and Thailand (10).
Earlier this month, SGX added two more Hong Kong SDRs – CATL (SGX: HCCD) and Pop Mart (SGX: HPPD).
Interested to know more about SDRs and these two new additions? Read on to find out.
The benefits of SDRs
It’s timely to reiterate the benefits of SDRs, as some investors may not be aware of these advantages.
First off, investors incur lower brokerage costs by trading an SDR, as overseas brokerages may impose minimum fees if you deal directly in overseas markets.
There are also foreign exchange fees involved when you buy shares in a different currency, along with custody charges imposed on foreign stocks.
These fees are not applicable for SDRs as they are listed on SGX in Singapore dollars (SGD) and are traded as a local stock.
The second point is convenience.
All SDR trades are conducted and settled in SGD during SGX’s trading days and hours.
In contrast, overseas trades need to be settled in foreign currency, thus incurring foreign currency fees and risks.
Dividends are also declared in either Hong Kong dollar (HKD) or Thai Baht (THB) and need to be converted back to SGD.
SDRs also provide adequate diversification by offering a wide variety of stocks from different sectors – more on this later.
Adding CATL and Pop Mart
SGX added both CATL and Pop Mart to its SDR slate, taking the total number of SDRs to 23, comprising 13 from Hong Kong and 10 from Thailand.
CATL is the world’s largest lithium battery manufacturer and supplies its products to major global automotive players.
Power battery systems made up the bulk (70%) of the company’s revenue in 2024.
Last year’s revenue saw a year-on-year decline because of lower average selling prices, despite higher sales volume of electric vehicle batteries.
However, net profit grew 15% year on year to more than S$9 billion.
The company has a 12-month trailing dividend yield of 2.2%.
As for Pop Mart, the company is well-known for its popular Labubu plush toys that are generating a frenzy on the internet.
Pop Mart is the largest pop toy company in China and derives the bulk of its revenue (53%) from figure toys, with 22% from plush toys.
2024 saw revenue doubling year on year to more than S$2.4 billion while net income shot up 186% year on year to S$580 million.
Pop Mart’s revenue for 2024 is nearly five times that of 2020, showcasing the tremendous growth that the company has undergone in the last few years.
The company plans to accelerate its international expansion and expand its intellectual property, both of which will act as long-term growth drivers for the business.
A wide range of sectors covered
With the addition of CATL and Pop Mart, SGX has further broadened its slate of SDRs (as shown below).
The suite of SDRs covers half of the Hang Seng Index and the Stock Exchange of Thailand (SET) 50 Index, respectively, giving investors ample opportunities to participate in Asian growth.
These SDRs also cover a gamut of industries ranging from technology and healthcare to consumer goods, industrials, and financials.
The addition of CATL adds one more name to the broadening base of technology stocks that also include electric vehicle manufacturer BYD (SGX: HYDD) and Alibaba (SGX: HBBD).
Pop Mart helps to add a Hong Kong name to the consumer goods sector, which currently has two Thai companies – CP (SGX: TPFD) and CP All (SGX: TCPD).
Get Smart: Watch this space for more
SGX has done a great job in providing investors with expanded investment options.
The launch of the SDRs and subsequent additions enable investors to gain convenient access to a wide range of stocks in industries that cannot be found locally.
SGX may plan to release more Hong Kong and Thai SDRs or even add a third country in the near future, so do watch this space as we cover these latest developments.
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Disclosure: Royston Yang owns shares of Singapore Exchange Limited.
