Foreign Opportunities: Eurozone, Japan & China

The world stage is rife with investment opportunities, and ADR trading makes it easy for American investors to hop on board. (If you’re unsure about what ADRs are, I recommend taking a look at our many articles explaining the basics of ADR trading.) Right now, I want to discuss some current opportunities that you can leverage through ADR and foreign ETF trading.

ADRs & ETFs in Europe

Various activities in the Eurozone market make it a good target for portfolio diversification. The European market is still wracked with volatility, and the play/counter-play of debt events and austerity measures is creating a market that’s loaded with short-term wealth building potential.

This isn’t necessarily a playground for buy-and-hold strategists, but Europe is generating a lot of great ROI figures for day traders and options traders. If you’re a skilled researcher and you have a bit of “the touch” when it comes to leveraging volatility in the short term, then the Eurozone might be your golden goose.

For a bit of stability, you’ll want to focus on ADSs associated with European companies that hold a multinational market share. A company like Siemens is a good example, as their huge market outside of the Eurozone has kept them relatively stable through the past few years of intense regional turmoil.

As the economy begins to stabilize in Europe, it may be wise to go the opposite route: targeting companies that serve only their regional market. These are likely to be the growth shares through a longer overall growth trend. These will be the stocks that hold the most risk, however, as not every company is guaranteed to rebound. Good research and technical analysis is advised.

ADRs & ETFs in China

China is a bit complicated as of recent events, although it has been hailed as the world’s premier growth market for some time. As a matter of fact, China was enjoying status as the uncontested linchpin of global growth. You know how the rest of the world was able to rebound from a massive recession? Well, we can all thank China for playing a big role in our recovery.

China’s not so much of an economic juggernaut these days. Their economy – fueled by easy credit and an arguably out of control real estate market – has been slowly declining. Unsettling trade data released from China over the course of months and years began to shake the resolve of investors, and rumors of doctored information have done nothing to improve matters.

The End of Chinese Exceptionalism:

Is it wise to buy and hold in China? Possibly, but only in select segments. Perhaps the most enlightened approach would be through ADR options trading, taking a position that leverages falling Chinese stock values. FOREX options trading in China is hot right now, and anywhere that currency values plays into an appreciable ROI, ADRs can become a profit center.

ADRs & ETFs in Japan

Japan carries another recovering economy that’s volatile at times, which means that options trading is still a very viable route. There are a number of enticing Japanese ETFs available in the US through ADR ETFs on the CBOE (Chicago Board Options Exchange).

There are likewise a bevy of large Japanese companies available as ADRs, including Toyota Motors, Kyocera Corporation, Canon Inc., and Konami. As with any investment, you’ll want to exercise a fair amount of due diligence before diving in. American Deposit Receipts make it easy to trade in foreign markets, but they don’t make it inherently safe.