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. Chart Advisor

    Bumpy Roads Ahead In Transportation

    Investors are keeping an eye on the transportation industry. We'll take a look at the trend direction and how to trade it.
  4. Investing

    How ETFs May Save You Thousands

    Being vigilant about the amount you pay and what you get for is important, but adding ETFs into the investment mix fits well with a value-seeking nature.
  5. Mutual Funds & ETFs

    3 Fixed Income ETFs in the Mining Sector

    Learn about the top three metals and mining exchange-traded funds (ETFs), and explore analyses of their characteristics and how investors can benefit from these ETFs.
  6. Mutual Funds & ETFs

    Mutual Funds Millennials Should Avoid

    Find out what kinds of mutual funds are unsuitable for millennial investors, especially when included in millennial retirement accounts.
  7. Mutual Funds & ETFs

    Top 3 Commodities Mutual Funds

    Get information about some of the most popular and best-performing mutual funds that are focused on commodity-related investments.
  8. Chart Advisor

    Agriculture Commodities Are In The Bear's Sights

    Agriculture stocks have experienced strong moves higher over recent weeks, but chart patterns on sugar, corn and wheat are suggesting the moves could be short lived.
  9. Mutual Funds & ETFs

    Top 5 Health Mutual Funds

    Learn about the top five mutual funds that invest in stocks of companies that primarily operate in the health care sector of the United States.
  10. Investing News

    Top Tips for Diversifying with Mutual Funds

    Are mutual funds becoming obsolete? If they have something to offer, which funds should you consider for diversification?
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. What do hedge fund analysts do?

    A hedge fund analyst primarily provides support to a portfolio manager on how to best structure the hedge fund's investment ... Read Full Answer >>
  5. How often do mutual funds pay capital gains?

    The frequency with which mutual funds pay capital gains varies. However, funds that generate a profit within a given year ... Read Full Answer >>
  6. How often do mutual funds report their holdings?

    The Securities and Exchange Commission (SEC) requires mutual funds to report complete lists of their holdings on a quarterly ... 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!