How to Invest in Samsung: Options for U.S. Investors in EWY and KF

Investing in Samsung can be challenging for American investors since the company isn’t listed on major U.S. exchanges. To gain exposure, you can use local South Korean brokers, purchase shares on the Korea Exchange (KRX), or invest indirectly through ETFs like EWY and KF that include Samsung. Tools like Pink Sheets and the Grey Market also help navigate these barriers.

How to Buy Samsung Shares on the Korea Exchange (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, an 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.

Navigating the Pink Sheets and Grey Market for Samsung Stocks

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.

Investing in ETFs for Samsung Exposure

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.

The Bottom Line

If you want to invest in Samsung, you can buy shares through South Korean brokerages or the Grey Market. But these options come with challenges, such as extensive documentation, currency risk, and fees. For most investors, using ETFs like EWY and KF offers a simpler way to gain exposure to Samsung while avoiding many of these complications.