How can an American invest in Samsung Group (005930.KS) if shares of the South Korean electronics giant don't trade on a major U.S. exchange and the company doesn't have an American Depositary Receipt (ADR)?

Sure, Samsung trades on the Korea Exchange (KRX) and its global depositary receipts are listed in Europe, but those avenues can be complicated or even verboten for American investors (such as the case with those GDRs). Fortunately, there are a few workarounds to the truly determined wannabe Samsung investor. (For related reading, see: Should You Care That Samsung Doesn't Need U.S. Investors?)

Buying Shares on the KRX

American investors can buy Samsung shares through a local broker in South Korea or invest directly (after filing the appropriate paperwork). The latter requires an investor to obtain an investor registration certificate (IRC) from South Korea's Financial Supervisory Service. After that, a stock trading account can be opened at a Korean securities firm, funds can be transferred and shares can be traded in real-time. Of course, there is much paperwork to submit, such as a standing proxy agreement, and investment ID application, registration of signature, criteria for determination of non-resident in Korea, and – of course – a copy of the investor's passport.

Investing with a local broker, such as Merrill Lynch International Inc., only requires opening an account, depositing funds and then placing trade orders. Of course, investors will take it on the chin with fees, not to mention the added currency risk of having to change Korean won for U.S dollars and back. After all that, traders will have to hurdle minimum order sizes, will have to trade during local trading hours and can't trade on margin.

Pink Sheets/Grey Market

Would-be investors can find shares of Samsung available on the Grey Market, which are traded over-the-counter, with the help of the National Quotation Bureau's Pink Sheets. Investors will still get dividend payments here, though they may not retain voting rights. There are several potential downsides, however, as volume (and therefore liquidity) and high bid-ask spreads mean that unloading shares quickly might not be easy. Also, transparency — such as reporting of daily trading — is light. It's wise for anyone trading Samsung OTC to use limit orders — not market orders — to account for the bid/ask spread disparity. (For more, see: The Over-The-Counter Market: An Introduction To Pink Sheets.)

Investing In An ETF

This might be the best way to get exposure to Samsung, though an investor will have to be content with investing in a basket containing other companies, as well. At least Samsung is so large its weighting in any South Korea-focused ETF tends to be heavy. For example, Samsung's weighting in the iShares MSCI South Korea ETF (EWY) and The Korea Fund Inc. (KF) stands at about 20% for each ETF. Samsung appears in other, internationally focused funds, as well. (For more, see: Following Buffett Into South Korea.)

The Bottom Line

Truly determined American investors who want to buy shares of Samsung have a few options, though they come with several hurdles, such as red tape, transaction fees, transparency and liquidity concerns and more. For the casual investor, an ETF focusing on South Korea, international conglomerates or electronics manufacturers might be the best, easiest avenue. (For more, see: Investing Beyond Your Borders.)

Related Articles
  1. Mutual Funds & ETFs

    The Top 3 ETFs For Investing in South Korea

    Learn more about the small yet growing number of South Korea ETFs, which track the often forgotten Asian Tiger responsible for Samsung, Kia and Hyundai.
  2. Investing News

    Should You Care That Samsung Doesn't Need U.S. Investors?

    Many international companies see no need to have fully-listed shares trading on U.S. exchanges.
  3. Mutual Funds & ETFs

    4 Mutual Funds Warren Buffet Would Buy

    Learn about four mutual funds Warren Buffett would invest and recommend to his trustee, and discover detailed analysis of these mutual funds.
  4. Mutual Funds & ETFs

    Passively Managed Vs. Actively Managed Mutual Funds: Which is Better?

    Learn about the differences between actively and passively managed mutual funds, and for which types of investors each management style is best suited.
  5. Investing Basics

    Top Tips for Diversifying with Exotic Currencies

    Is there an opportunity in exotic currencies right now, or are you safer sticking to the major ones?
  6. Professionals

    How to Navigate Taxable Mutual Fund Distributions

    It's almost time for year-end capital gains distributions for mutual funds. Here's how to monitor them and minimize their tax impact.
  7. Mutual Funds & ETFs

    The 3 Biggest Mutual Fund Companies in the US

    Compare and contrast the rise of America's big three institutional asset managers: BlackRock Funds, The Vanguard Group and State Street Global Advisors.
  8. Mutual Funds & ETFs

    Top 4 Communications Mutual Funds

    Discover some of the best mutual funds in the communications sector, and learn how investors can position investments within these funds.
  9. Mutual Funds & ETFs

    Top 4 Transportation Mutual Funds

    Discover the top-rated mutual funds in the transportation industry, and understand how investors can position these funds in their asset allocation.
  10. Professionals

    5 Top-Rated Funds for Your Retirement Portfolio

    Mutual funds are a good choice for emotional investors. Here are five popular funds to consider.
  1. Can mutual funds only hold stocks?

    There are some types of mutual funds, called stock funds or equity funds, which hold only stocks. However, there are a number ... Read Full Answer >>
  2. How do mutual funds compound interest?

    The magic of compound interest can be summed up as the concept of interest making interest. On the other hand, simple interest ... Read Full Answer >>
  3. Do mutual funds pay interest?

    Some mutual funds pay interest, though it depends on the types of assets held in the funds' portfolios. Specifically, bond ... Read Full Answer >>
  4. Why have mutual funds become so popular?

    Mutual funds have become an incredibly popular option for a wide variety of investors. This is primarily due to the automatic ... Read Full Answer >>
  5. Do mutual funds pay dividends?

    Depending on the specific assets in its portfolio, a mutual fund may generate income for shareholders in the form of capital ... Read Full Answer >>
  6. What licenses does a hedge fund manager need to have?

    A hedge fund manager does not necessarily need any specific license to operate a fund, but depending on the type of investments ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!