Asia is home to some of the world’s biggest stock markets, yet investing there from another country can feel complicated. The exchanges, currencies and rules all differ. The good news is that there are four main routes and the simplest one needs only an ordinary brokerage account.
This guide explains each route, the costs and risks and what to check first. For what the main markets track, see our guide to Asian stock indexes explained.
Route 1: ETFs and Funds
- What it is: A fund that holds a basket of Asian stocks and trades like a share on a major exchange.
- Why start here: You get instant diversification, one trading currency and no local account.
- Types: Country funds for Japan, India or Korea, regional funds for Asia excluding Japan and index funds that track the Nikkei 225 or Hang Seng.
- What to check: Fees, the index tracked and the top holdings, since a few large companies can dominate.
Route 2: ADRs
- What they are: Certificates issued by US banks that represent shares of foreign companies and trade on US exchanges.
- The benefit: You trade in dollars during US market hours.
- The trade offs: The choice is limited, and fees can apply through the depositary bank.
- A risk to know: Some analysts note that buying Hong Kong listed shares directly avoids the delisting risk that comes with certain Chinese ADRs, according to TIKR.
Route 3: Buy Directly on Asian Exchanges
- What it is: Many international brokers offer access to exchanges such as Hong Kong and Tokyo.
- Hong Kong: Mainland companies listed there as H shares trade in Hong Kong dollars.
- Tokyo: Trading runs from 9:00 to 11:30 and from 12:30 to 15:30 Japan time. The close moved from 15:00 to 15:30 on November 5, 2024.
- Lot sizes: Japanese stocks usually trade in units of 100 shares, so one lot can cost much more than one share, and some brokers do not offer fractional trading.
- Time zones: Asian hours can fall in the middle of your night, so limit orders help you control the price.
Route 4: Mainland China Through Stock Connect
- What it is: A link that lets international investors trade eligible mainland A shares through Hong Kong brokers. The Shanghai link launched in 2014, and Shenzhen followed in 2016, according to Morningstar.
- Limits: Only eligible stocks are covered. The South China Morning Post reports that cross border investors cannot reach many of the mainland’s newest AI listings this way.
- ETF option: ETF Connect lets overseas investors trade selected mainland listed ETFs, according to Invesco.
Costs and Risks to Understand
- Currency risk: The yen traded near 157 per dollar on October 30. In 2024 the dollar fell from above 161 yen in July to about 142 yen by August 5, a swing of about 13% in weeks. See how Bank of Japan rate hikes affect the yen and Nikkei 225.
- Dividend tax: Japan generally withholds 15.315% on dividends paid to non residents, and treaties can reduce it.
- Rules at home: Some countries limit overseas investing. India’s Liberalised Remittance Scheme, for example, caps remittances at USD 250,000 a year, according to Paasa.
- Liquidity and disclosure: Smaller markets can trade thinly, and reporting standards differ.
A Simple Starting Plan
- Step 1: Check which Asian exchanges your broker offers and what it charges.
- Step 2: Start with a diversified ETF rather than single stocks.
- Step 3: Decide how much of your portfolio you are comfortable putting in Asia.
- Step 4: Learn one market at a time, including its central bank and its currency. Our guide to how a strong US dollar affects Asian markets is a good next read.
- Step 5: Use limit orders, and track fees and taxes from the start.
The Takeaway
Start simple with a fund, understand the currency risk, and move to direct stock buying only when you know the market. Check your own country’s rules and taxes before you invest, because they vary widely.
This article is for education only and is not financial advice.