There are various types of shares listed on the ASX, the most common is ordinary shares but there are less common ones. Here are some of the different types of shares listed on the ASX and what they each mean.
These are the most common security traded on the ASX. A share is a portion of ownership in a company. Owners of ordinary shares are entitled voting rights so they can vote on significant decisions such as the appointment of a board of directors. The more shares a share holder owns the more weight they have on their opinion. This is because each shareholder gets one vote for every stock they own. However ordinary shareholders are considered as unsecured creditors. So if the company is in liquidation then creditors and preferred shareholders rank higher in the payment of debt.
CHESS Depository Interest (CDI)
These are shares of international companies traded on the Australian exchange markets. This allows investors to receive the same ownership in foreign companies as holding them on the international exchange. Companies which are incorporated overseas cannot transfer their shares through to the ASX. It opens up more opportunities for Australian investors as they can access products which are not available in the local market. For example, News Corp (NWS) is incorporated in the US and only trades in the US. However Australian investors can own shares in NWS via CDIs.
There are some differences between CDI’s and ordinary shares. You cannot vote at a company meeting like you would with ordinary shares unless laws from the country of where the company is domiciled allows you to. You may also receive less shares than if you held the shares directly in the local market.
Staple Securities can consist of different components such as units in a trust and shares in a company and these components are traded with a single stock code. An example of a stapled security is a listed property trust and a property management company. The trust holds the property asset and the company manages the property. The structure of staple securities can offer tax benefits as stapling can reduce the total tax bill paid. For example, if a shareholder held a listed property trust and a company share, then the listed property trust will need to distribute 90 per cent of rental income to unit holders. This income is then tax at the unit holder’s marginal rate. Companies are taxed at 30 per cent before dividend are paid and shareholders need to declare this dividend income in their tax but they receive the franking credits. In a stapled security however, the rental income is at 30 percent and then delivered with franking credits. This means that the tax payer can pay less tax on a staple security than holding two separate stocks.
ORD FOR. EXEMPT NZX
These are New Zealand Companies that have decided to list on the Australian Stock Exchange. These companies can dual list on the ASX as an ASX Foreign Exempt listing but they do not have to adhere to the stricter rules applied to other Foreign Exempt listing. These companies will be regulated by their New Zealand Exchange.
Lauren Hua is a private client adviser at Fairmont Equities.
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