Two contrasting views on US equity ownership of foreign stocks: will it affect IRO’s targeting of US investors?
Research is now showing that institutions own more than 61% of US equity and that this number has grown rapidly in recent years, up from 30% in the 80’s, and 50% in 2002. And the same research is showing that ownership of foreign equity is also rising fast. Clearly, as a result, European companies in their new investor targeting have focussed their energies on relevant sectors in this area.
However this week E*Trade made perhaps a surprising announcement: The New York-based company said its new Global Trading Platform will allow E*Trade's individual-investor customers in the U.S. to buy, hold and sell foreign shares in their local currency in six key markets. E*Trade is starting with online trading for stocks in Canada, France, Germany, Hong Kong, Japan and the United Kingdom, but it also is offering broker-assisted trading in additional countries and hopes to eventually include as many as 42 international markets and related currencies in the online system.
Buying foreign equity directly goes beyond more usual ways for individuals to invest overseas, such as buying an internationally-focused mutual fund or the American depositary receipts of a foreign company.
In response, E*Trade cite a recent survey of their brokerage customers, which found that fully two-thirds of those polled are interested in trading on exchanges outside the U.S.
But the expanded access to foreign equity raises questions about access to information. E*Trade notes that their investors will find different standards in areas such as corporate disclosure, accounting, regulation and business customs. Information on foreign companies may not be as easily available as on American companies.
Which suggests that European companies planning their US IR communications should consider using the broadcast media to reach these investors.