What to do now with the Russian ADR? Part 3

Monday, 17. October 2022

What to do now with the Russian ADR? Part 3

Zerich Securities and Freedom Broker offer to sell Russian ADRs

After Clearstream refused to transfer Russian ADR (American Depositary Receipts) in September, it now appeared to be possible again to transfer Russian ADR and then exchange them for original shares following a new announcement on 6 October by Clearstream. If the ADR transfer becomes possible again via Clearstream, two experienced brokers from Cyprus, Freedom Broker (formerly Freedom Finance) and Zerich Securities Ltd, are now available to facilitate your exchange. What is new is that the sale of original shares is now also possible via the brokers Zerich Securities and Freedom Broker as soon as the ADR have arrived. However, the “Russian way” is still possible with a limited time window until 11 November 2022.

Andreas Männicke gives his assessments on the possibilities of converting the ADR/GDR into original Russian shares in his market letter EAST STOCK TRENDS (www.eaststock.de) and in his new EastStockTV video, episode 201 at www.YouTube.com,

Holders of Russian ADR, Eastern European funds, Russia funds, ETF and Russian bonds are disadvantaged by the sanctions

It is basically an absurdity how Western investors in Russian bonds and Russian ADRs (American Depository Receipts), but also in Eastern European funds and ETFs, are left out in the cold so much, but this is also the fault of Clearstream, the US custodians and above all the nonsensical sanctions. The total volume of ADR is probably over 100 billion euros, which is now lying idle, with bonds even more. But it is also incomprehensible why the Russian ADR were no longer tradable after the Moscow Stock Exchange reopened on 24 March. After that, ADR holders could no longer become active.

Why is Lindner not reacting?

Basically, every investor in Russian ADRs should now write letters to the Federal Minister of Finance, Lindner, to demand clarification and investor protection, which the Schutzvereinigung für Kleinanleger (SDK) has already done. However, the letter to Lindner has so far remained unanswered. Many more investors and their lawyers would have to get involved and sue, because what the EU and the German government and Clearstream are doing is almost tantamount to expropriation. This should not be accepted without resistance. One must also ask oneself whether the Americans are not also behind the fact that the transfer of the ADR to the broker who can help no longer works.

Moscow stock exchange in a downward spiral

So Russian ADR are no longer tradable and all Eastern European funds and ETF have been set to zero, although there are prices on the Moscow Exchange. This is an absurdity. However, the MOEX index of the Moscow Stock Exchange, like all world stock exchanges, fell sharply in September, dropping from 2500 to below 2000 index points, a new low. It thus fell by 52 per cent in 1 year. The RTS index also fell from 1250 to below 1000 index points, a 49 per cent drop in 1 year.  The difference is due to the strong rouble, which is stabilising at 60 EUR/RUB.

Tense monetary and geopolitical situation continues

But the world’s stock markets did not fare any better in September/early October, as almost all indices of the major world stock markets are now trading near their lows for the year. The culprit is the FED with its rising interest rates to fight inflation, i.e. the restrictive monetary policy of the FED and ECB, but also the ever escalating war in Ukraine with no prospect of a quick improvement. In the UK, there was almost a collapse of British pension funds last week, with inevitable global domino effects only prevented by the resolute intervention of the British central bank. However, things also look very bad at Credit Suisse with many skeletons in the closet. Due to the sharp rise in interest rates, however, there is now also the threat of a real estate crash and thus further bank failures. In addition, there is the threat of a wave of insolvencies and recession due to excessively high gas and electricity prices, although an oil/gas price cap is now supposed to help. It will be interesting to see what the reporting season brings us.

Misleading announcements by Clearstream

On 6 October, Clearstream again confused investors by making a vague announcement on how the transfer of DR (Depositary Receipts) could be made possible again. Obviously, this does not concern Russian DRs, because a transfer to law firms or brokers who subsequently facilitate the exchange into original shares is still not possible, which is an absurdity.

Thus, ADR holders have been paralysed and are unable to act. However, investors should now wait and see whether they will soon receive a letter from their bank/broker by way of a “corporate action event” stating that they can exchange the ADRs. Then the depository in the USA would have to agree first. Because of the “Russian route”, the depositary in the USA does not know who has exchanged via the “Russian route” so far. There would now have to be an exchange of data between the Russian depository and the American depository so that the DRs are not assigned twice. This is now the data problem that is unsolved as long as the war continues and the sanctions are there.

While Clearstream made it possible in August to transfer ADRs, i.e. the depositary receipts at the Bank of New York to brokers, which made it possible to exchange ADRs for original shares at short notice, it is now still not possible even after the misleading announcement of 6 October.

After exchange into original shares, the first sales opportunities are now available at Freedom Broker and Zerich Securities Ltd.

The Russian depository NSD (National Settlement Depository) has conceded that it will not charge investors any fees until the end of the year, so that in principle the way would be free again until the end of this year to transfer the ADR on the one hand and to exchange them for original Russian shares on the other. But Clearstream does not want to or cannot play along so far because of the US custodians (by order of the US??). Despite Clearstream’s somewhat vague announcement, no Russian ADRs have yet been transferred after 6 October until 14 October. Since 6 October, however, conversion has been possible again if the ADRs have landed at Freedom Broker beforehand, i.e. the exchange of some ADRs for original Russian shares as with Gazprom and LUKoil. You can read the complete list of ADR that you exchange in the next stock exchange letter EAST STOCK TRENDS 10/22 (www.eaststock.de ).

Freedom Broker (formerly Freedom Finance) now even offers to sell the exchanged original shares at a certain discount so that you receive cash. The basis is then the current share price on the Moscow stock exchange and the current rouble rate, which is stabilising at 60 EUR/RUB. One Gazprom is still worth over €7.

The “Russian way” is open to all, but only for a short time.

In addition, however, there is still a “Russian way” of forced conversion approved by the Duma without Western partners, but this is somewhat more costly because it involves higher costs for law firms and visits to notaries for the apostille. The law firms Goldenstein from Potsdam and Schirp & Partner from Berlin continue to provide assistance for a fee, although Goldenstein is now no longer accepting new clients due to time constraints.  This is because the Russian path has been limited by the Duma to 11 November 2022. However, it is also possible that this deadline will be extended again by Duma decision. It is also possible, however, that after 11 November 2022 the route via Clearstream will be made possible again, which remains to be seen.

Those who have not yet exchanged their ADRs may then have the opportunity to do so again with the broker Freedom Broker from Cyprus, which also has an office in Berlin and can explain everything in German. The prerequisite for this, however, is the opening of an account with Freedom Broker, which is based in Cyprus. If you want to open an account with Freedom Finance, please use this link: https://freedom24.com/invite/?utm_source=referral&utm_medium=invite&utm_campaign=pfu2952896. Even if the transfer from your bank/broker is not yet possible because of Clearstream, it might be worth opening an account now, because in November/December things might have to move very quickly. You should be prepared for everything beforehand.

After you have opened the account, you need to instruct your bank/broker in writing to transfer the DR to your account to Freedom Broker. However, the transfer may not be successful right away, but only in November/December. In November, the “Russian way” will be terminated. It may well be that an ADR transfer via Clearstream will then be possible again. But then you only have until the end of the year.

Freedom Broker now offers pre-IPOs

Quite independently of the transfer of ADR and the exchange into original shares, opening an account with Freedom Broker is worthwhile for various reasons. Freedom Broker not only offers participation in IPOs on NASDAQ for a certain amount, but recently also in pre-IPOs at a late private equity stage for 2 very promising companies. In addition, it is now possible to purchase call and put options via Freedom Broker and thus also hedge against falling prices. Freedom Broker always gives investors new investment ideas, such as the current list of interesting takeover candidates. The example of the planned takeover of Twitter by Tesla (Elon Musk) with a price increase of 20 percent shows how promising takeover candidates can be even in bad stock market phases. At Freedom Broker, an employee is always available to advise you. On a US dollar account, the investor is immediately credited with 3 percent. for the liquidity portfolio, which is more than a German time deposit account.

Zerich Securities Ltd. offers the exchange and sale of Russian ADRs

You can also open an account with Zerich Securities Ltd. via the Mind Money platform using the following link Mind Money (website: https://mind-money.eu/de/ or especially for ADR: https://mind-money.eu/de/faq-russian-adr-conversion ) even in German. Zerich Securities Ltd. also continues to offer not only conversion into original shares, but also sale at a certain discount. However, the ADRs must first reach Zerich Securities Ltd., which is easier to do via Euroclear than via Clearstream, where even after the vague and confusing announcement after 6 October a transfer is still not possible.

IPOs and new analysis on gas, wheat, meat at Zerich Securities Ltd.

But it is also worth opening an account at Zerich Securities Ltd or Mind Money, regardless of the sale of Russian ADRs, because the broker also offers participation in IPOs, as was recently the case with Porsche. The Porsche share got off to a bad start on the first day of trading, but subsequently rose by 14 percent even against the falling DAX40. Zerich Securities Ltd. now wants to make an analysis of commodities such as gas, wheat and meat, because it is also possible to earn money with certain products or shares from the sector, even in bear markets like now.

First inform, then invest

Inform yourself now in detail about the background and the development of the Ukraine/Russia crisis but also about the future recovery potential of undervalued shares from Eastern Europe. There are also new opportunities in the Baltic States, Kazakhstan, Georgia and Ukraine.

Review: In 2018, 10 stock markets from Eastern Europe were among the best performing stock markets in the world, all clearly outperforming the DAX and also the US stock market. The Moscow Stock Exchange was the clear outperformer among all global stock markets in 2019, with a gain of over 46 per cent in euro terms. However, the Bucharest Stock Exchange (Romania) also rose by over 32 per cent in 2019. The stock markets in South-Eastern Europe and also in the Baltic countries remained very stable on the plus side (Croatia +13 per cent). In 2020 year 6 stock exchanges from Eastern Europe were among the 30 best performing stock markets in the world and last year even 11 stock exchanges from Eastern Europe.  This year, 5 Eastern European stock exchanges, mostly from the Balkans, clearly outperformed the DAX. After the Ukraine war, it is still worthwhile to look beyond the horizon to Eastern Europe.

Order now a trial subscription (3 issues by e-mail for only 15 €) of the monthly stock exchange letter EAST STOCK TRENDS (EST) with another Ukraine/Kazakhstan/Russia special and a dividend special as well as with a lot of background information and new investment suggestions such as the “Stock of the Month” and lucrative certificates at www.eaststock.de, there under Stock Exchange Letter.  The next EST will be published at the end of October.

TV/radio notes: The last radio interview was on Börsen Radio Networks on 23 August 2022.  The next Börsen Radio Networks interview will be on 31 October 2022. Please also note the last EastStockTV video on YouTube about the Ukraine war and the new outperformance opportunities of the Eastern European stock markets as well as the Stock Exchange Talk with Rainer Hahn and Bastian Stein on 12 September 2022 and the interview with Michael Mross on 10 October 2022. You can download the interviews at wwww.eaststock.de, there under the heading “Interviews” as well as the EastStockTV videos. By the way: have you already subscribed to the EastStockTV YouTube channel? Andreas Männicke will also give a presentation for Freedom Broker at the Börsentag in Hamburg on 12 November 2022.

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