What Are Singapore Depository Receipts (SDRs)? SDR Singapore Explained

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01 Jun 2023

Good news for investors in Singapore.

We now have more investment options with the launch of Singapore (SDRs).

On Tuesday, 30 May 2023, SDRs were launched in Singapore with Phillip Securities Pte Ltd issuing the following SDR representing a beneficial ownership interest in Thai blue chip securities: Airports of Thailand (AOT), CP ALL (CPALL), and PTT Exploration & Production (PTTEP):

For the uninitiated, SDRs are financial instruments that enable Singaporean investors to purchase shares of foreign corporations that are listed on international stock markets. Singaporeans have the chance to access international markets and diversify their investment portfolios without directly purchasing shares of foreign corporations.

Here’s all you need to know!

TL;DR: All You Need to Know About SDR Singapore

SDR Name	SGX Code	Underlying Security	Underlying Market	SDR : Underlying Security Ratio
Airports of Thailand TH SDR	TATD	Airports of Thailand NVDR	Stock Exchange of Thailand	1 : 1
CP All TH SDR	TCPD	CP All NVDR	Stock Exchange of Thailand	1 : 1
PTT Exploration & Prod TH SDR	TPED	PTT Exploration & Production NVDR	Stock Exchange of Thailand	1 : 1

Disclaimer: The information provided by Seedly serves as an educational piece and is not intended to be personalised investment advice. Readers should always do their own due diligence and consider their financial goals before investing in any investment product.

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What Are Singapore Depository Receipts (SDRs)? Are They SG Stocks?
How SDRs Work
Risks of Investing in SDRs
Should You Invest in SDRs?
How to Invest in SDRs

What Are Singapore Depository Receipts (SDRs)? Are They SG Stocks?

SDRs are instruments that represent a beneficial interest in underlying securities listed on a foreign exchange. An intermediary known as an “SDR issuer” issues an SDR for trading on the Singapore Exchange (SGX-ST) GlobalQuote, SGX’s quotation board for international securities on an unsponsored basis, even if they do not have a formal arrangement with the underlying company.

Simply put, SDRs are similar to “proxy shares” in that they can be issued by international businesses looking to raise money from Singaporean investors. A particular number of shares of the foreign corporation are represented by each SDR. Investors receive the same financial advantages as if they actually owned the shares, just like a “proxy share” would.

SGX Dividends

SDRs are denominated in Singapore dollars (SGD), allowing investors to invest in foreign firms without having to worry about currency exchange rates. Dividend payments from the overseas corporation are converted into SGD by the depository bank and given to SDR holders.

SDR holders typically have the right to vote at shareholder meetings, receive company communications, and participate in corporate action events like stock splits or mergers. The particular rights, however, could change based on the SDR agreement’s provisions.

How SDRs Work

Each SDR stands for a particular security listed on an international exchange and deposited with a custodian the SDR issuer chooses in the relevant home market.

The custodian owns the underlying securities on behalf of the SDR issuer, who in turn holds the beneficial interest in the underlying securities on behalf of SDR holders. The underlying securities are also registered in the custodian’s name.

Risks of Investing in SDRs

More importantly, you need to understand that like any investment, investing in SDRs has its own specific set of risks.

The main SDR risk is outlined in this section produced by SGX, which is not meant to be comprehensive. The SDR Programme Disclosure Document contains additional information on the hazards. Before purchasing SDRs, investors should read the SDR programme disclosure document. Investors who do not completely comprehend the risk involved should not purchase SDRs.

Market Risk: Investing in SDR is subject to market, country, and company-specific risks, similar to investing in the underlying securities, as SDR represents indirect ownership of the underlying securities.

Price Risk: The trading price of an SDR may not always track the price of its underlying securities in the overseas market. An SDR may trade at a premium or discount to its underlying securities in overseas markets. SDR prices may be subject to wide fluctuations even when the underlying securities are relatively stable. The price and volatility may be influenced by factors such as but not limited to the underlying company’s performance, foreign exchange rates, market conditions in Singapore and overseas markets, interest rates, liquidity of the SDR, etc.
You may not be able to trade SDR at the time price-sensitive information is released by the underlying companies, and it may be difficult to locate up-to-date information. The underlying companies may disclose information to the overseas exchange outside Singapore market trading hours. Such price-sensitive information may only be available via the overseas exchange, will not be published on SGX, and may be disclosed in a language other than English. There may also be a difference in trading days and hours between the overseas exchange and the SGX-ST.
It is possible that trading of SDR on the SGX-ST remains available even though trading of the underlying securities is halted or suspended in the overseas market. While the SGX-ST may stop trading in a series of SDRs if trading in the underlying securities is halted or suspended, there may be a lag between the time that trading in the underlying securities is halted or suspended and when trading in the SDR is stopped.

Foreign Currency Exchange Rate Risk: As SDR on SGX-ST GlobalQuote are denominated in Singapore dollars while the underlying securities are denominated in a foreign currency, you will be exposed to foreign exchange rate fluctuations between Singapore dollars and the foreign currency. The trading price of the SDR and value of distributions you receive from the SDR issuer will be affected by the fluctuations in the exchange rate or may be affected by exchange controls.

Liquidity Risk: There is a risk that SDR may be illiquid. If the SDR are illiquid, there is a risk that you may not be able to buy or sell your SDR at a reasonable price or at all, and the price of the SDR may be volatile and diverge materially from the price of its underlying securities.
Trading in SDR may be stopped by the SGX-ST. There is a risk that the trading of SDR may be stopped by the SGX-ST at any time. In particular, the SGX-ST may stop trading in a series of SDR if trading in the underlying securities to which the SDR relate is halted or suspended. Additionally, there may be a lag time between when trading in the underlying securities is halted or suspended and when trading in the SDR is stopped.

Overseas Market Risk: Overseas markets may be subject to rules that may offer different investor protection as compared to Singapore. Before starting to trade, you should be fully aware of the types of redress available to you in Singapore and other relevant jurisdictions, if any. Overseas markets are influenced by the foreign jurisdiction’s political, economic, and social developments, which may be uncertain and increase the risk of investing in SDR on foreign-listed securities.

Risk Arising from Foreign Laws: The underlying securities of SDR may not be subject to the same disclosure standards that apply to investment products listed for quotation or quoted on an approved exchange in Singapore. The issuer of the underlying securities is not subject to the listing requirements of the SGX-ST. The issuer of the underlying securities is not subject to the disclosure requirements of SGX-ST. SGX-ST does not regulate the issuer of the underlying securities.
In some countries, legal concepts that are practised in mature legal systems may not be in place or may have yet to be tested in courts. This would make it more difficult to predict with a degree of certainty the outcome of judicial proceedings or even the quantum of damages that may be awarded following a successful claim.
The laws of some jurisdictions may prohibit or restrict the repatriation of funds from such jurisdictions, including dividends and interest arising from investments in such countries. Therefore, there is no guarantee that the funds arising from your investment will be capable of being remitted.
Some jurisdictions may also restrict the amount or type of investment products that foreign investors may trade. This can affect the liquidity and prices of the products that you invest in.
Singapore taxation laws, securities laws, disclosure laws and standards, accounting standards, auditing standards, financial reporting standards, and the format of required Singapore company disclosures differ from foreign laws and practices. The difference in laws and standards may affect the quality and comparability of information provided and available to you. It may also be more difficult to locate up-to-date information, and the information published may only be available in a foreign language. Before cancelling your SDR and having the underlying securities to which they relate transferred to you, you should assess how any applicable foreign laws will affect you as a holder of the underlying securities and ensure that you can comply with those foreign laws, including any investment, dealing or holding restrictions. You will be responsible for any costs associated with your failure to comply with any applicable foreign laws.

Trading Days and Hours of the Underlying Security May Be Different From That of SGX-ST: The underlying security’s trading days and hours may differ from that of the SGX-ST. In assessing the price of the SDR, you should be aware of the differences in the time zone and the actual trading days and hours of the underlying security. For example, the underlying security price may be volatile when the SGX-ST is not open for the trading of SDR. There may also be a certain period of time during the SGX- ST trading hours when the underlying security prices are not available. During such times, there may be higher liquidity risk.

Risks That Arise From the Terms of the SDR: When you invest in SDR, you agree to be bound by the terms of the SDR, and certain risks arise from such terms. There is a risk that you may not receive the distributions on the underlying security if the SDR issuer is unable to deal in the securities it receives and you will be treated as having waived such rights to distributions.

Should You Invest in SDRs?

Now that you’ve taken note of the risks let’s look into the first batch of SDRs that you can invest in:

SDR Name	SGX Code	Underlying Security	Underlying Market	SDR : Underlying Security Ratio
Airports of Thailand TH SDR	TATD	Airports of Thailand NVDR	Stock Exchange of Thailand	1 : 1
CP All TH SDR	TCPD	CP All NVDR	Stock Exchange of Thailand	1 : 1
PTT Exploration & Prod TH SDR	TPED	PTT Exploration & Production NVDR	Stock Exchange of Thailand	1 : 1

For now, you can only invest in Thai SDRs, which were previously not as accessible to foreigners before you could buy SDRs:

If you want to own shares of these companies, you will need to own them through this rather complex ownership structure.

Next, it goes without saying that you need to do your due diligence on the underlying companies.

Our beginner’s guide to investing in stocks should help:

I found this point to be especially important.

Basically, investing should be within your circle of competence and interest.

For example, if you don’t have an interest or do not understand the oil and gas stocks, don’t invest in them.

Because you won’t be able to even comprehend the context and background of the stocks, what more is the stock’s intrinsic value.

Just because you hearsay that it will do well doesn’t mean it definitely will.

Don’t FOMO, okay.

You can determine your circle of competence from the following:

Your industry of work
Places you shop at
Places you dine at
Things you like to do.

To better understand the businesses you are interested in, you can always:

Talk to customers, employees, suppliers and even competitors
Read annual reports of the company and competitors, industry reports, and analyst reports
Try out the company’s products and actively take note of customer reviews.

If you have done your due diligence and found that these SDRs are worth investing in despite the risks, here is how you can invest in SDRs.

How to Invest in SDRs

SDRs are traded on SGX-ST GlobalQuote, SGX’s international securities quotation board. The SGX-ST Listing Rules do not apply to the SDR because they are not listed on the SGX-ST.

Similar to buying and selling shares traded on the SGX-ST, you can purchase and sell SDR through your preferred brokerage:

The SGX-ST is the only exchange where the SDRs are exchanged; thus, investors do not directly deal with the foreign exchange. Trading of the SDR is anticipated to cease when trading in the underlying securities is cut off or suspended on the foreign exchange. When trading in the Non-Voting Depository Receipt (NVDR) to which the SDR link is terminated or suspended, there can be a delay before trading in the SDR also comes to an end. Any such stoppage will be announced on the SGX.

SDRs are cleared and settled by the CDP on a T+2 basis, much like other securities traded on the SGX-ST. Also, the CDP will carry out buy-in on short positions in SDR on T+2.

About Joel Koh

History student turned writer at Seedly. Before you ask, not a teacher. I hope to help people make better financial decisions and not let money control them.

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