13 January 2012

Baidu ADR up 10% in 2012 year-to-date

• As of 12 January, Baidu ADR is up 10% in 2012, thereby outperforming the NASDAQ 100, of which it is a key constituent .
  
• Baidu is a Chinese-language internet search provider that is available for trading as an American Depository Receipt on the SGX GlobalQuote platform.
  
• At a trading price of US$128.50, the minimum investment in Baidu ADR is ten units at US$1,285, not including transaction costs.
  
• In China, as of 12 January the FTSE China A50 Index has gained 4.3% in 2012, CPI has been reported to be up 4.1% for the 2011 year and the latest GDP numbers are due on 17 January 2012.

Baidu, Inc. (Baidu) is a Chinese-language internet search provider that is available for trading as an American Depository Receipt (ADR) on the Singapore Exchange (SGX) GlobalQuote platform. This is an extension of the established marketplace of ADRs traded on both the New York Stock Exchange and NASDAQ.

ADRs are structured to simplify the access process of participating in the securities of an overseas company. Specifically, ADRs are securities representing ownership in non-US companies that are issued by U.S. financial institutions. The process of trading of the securities listed on GlobalQuote is similar to that of trading securities on SGX. Live prices of these ADRs, including Baidu ADR can be found here and the risks associated with ADR trading can be found here.

The chart below shows the relative performance of Baidu ADR, Nasdaq 100 and S&P 500 indices over 2011 and the first eight trading sessions of 2012. On a 2012 year–to-date basis to the close of the US session on 12 January, Baidu ADR has risen 10%. Meanwhile the Nasdaq 100 and S&P 500 indices inclined 4.6% and 3.0% respectively

While the ADR has demonstrated higher relative pricing volatility to the two indices, the price of Baidu ADR gained 20% in 2011 . Baidu ADR is a top twenty component of the NASDAQ 100 in terms of market capitalisation that can be traded around the clock in the U.S. and the SGX GlobalQuote platform.

In the context of China, for the year to 12 January 2012, the FTSE China A50 Index has gained 4.3%.  On the broad China macroeconomic front, inflation numbers were released this week and GDP growth is due next week. On 12 January, the National Bureau of Statistics reported that in December, China inflation cooled to a 15 month low and producer price gains were the smallest in 2 years.  The consumer price index (CPI) was reported to have gained 4.1% year-on-year both in cities and rural areas. Food prices went up by 9.1% while the non-food prices increased by 1.9%. The report also stated that consumer prices rose 5.4% for the year 2011, and exceeded the government’s target of 4.0 % set at the beginning of the year. Next on the list of economic reporting is China GDP which is due for release on 17 January 2012.

As the Asian Gateway, SGX provides a number of investment mediums that facilitate investor access to China. Complementing the synthetic replicated Exchange Traded Funds based on China Indices, the SGX offers ADRs on a number of China corporations. In terms of participation and turnover, the most active of these ADRs in 2011, was Baidu ADR.

As mentioned earlier, Baidu is a Chinese-language internet search provider. The Company conducts its operations in China principally through Baidu Online Network Technology (Beijing) Co., Ltd., its wholly owned subsidiary in Beijing, China. It also conducts its operations in China through Baidu Netcom Science Technology Co. Ltd., which holds the licenses and approvals necessary to operate the Company’s websites and provide online advertising services.

The Baidu investor relations website can be found here with its next earnings report scheduled to be released around 31st January. Baidu was listed on 5 August 2005 on the NASDAQ exchange. In terms of conversion, one Class A ordinary share is equal to ten ADRs. Baidu has not declared or paid any cash dividends on its ADRs and ordinary shares, and according to the investor relations FAQ page, does not have any present plan to pay cash dividends.

The table below details the ten dual-listed China ADRs with primary listings in Hong Kong, and eleven single-listed ADRs based on shares of China issuers that do not have common share listings.

ADRs can be dual-listed or single-listed. Dual-listed ADRs are listed in the U.S., and represent ownership of shares in an issuer whose shares are listed in an overseas market. For example, China Mobile Ltd has common shares listed on the Hong Kong Exchange and ADRs listed on the New York Stock Exchange, and is therefore categorised as dual-listed. Such issuers, such as China Mobile, are required to abide by the securities laws and listing regulations in both the overseas market and the US.

Single-listed ADRs are listed in the US, and represent ownership of shares in an issuer not listed in an overseas market. For example, Baidu Inc does not have listed common shares but its ADRs are listed on NASDAQ. Such companies are therefore required to abide by the securities laws and listing regulations in the US.

All single-listed ADRs traded on GlobalQuote are marked with a ”+” at the end of their stock trading name, for example as the table highlights, the trading name of Baidu ADR is BIDU ADR 10US$+.

Specified Investment Products

As part of the Monetary Authority of Singapore’s (MAS) initiative to introduce stronger measures and enhance requirements to further safeguard the interests of individual investors, Exchange Traded Funds have been categorised as Specified Investment Products (SIPs).

SGX SIPs have structures, features and risks that may be more complex in nature. The MAS now requires broking firms to ascertain whether an individual investor has the relevant knowledge and experience to understand the risks and features of SIPs before allowing the individual to open an account to trade SIPs listed on both securities and derivatives markets.

SGX has introduced two online initiatives, a Customer Account Review Module and an Online Education programme, to support individual investors in their understanding and trading of SIPs listed on SGX. Click here to access these initiatives.

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