Air New Zealand (ASX: AIZ), for example, has its primary listing on NZX (the New Zealand stock exchange) and is listed on ASX through an ASX Foreign Exempt Listing.[i] Investors can buy and sell Air New Zealand and other ASX-listed international companies like any other share.
Other well-known NZ-based companies listed on ASX include Auckland International Airport (ASX: AIA), and Kathmandu Holdings (ASX: KMD) – both dual-listed; and Xero (ASX: XRO).
NZ has been a strong source of ASX listings. Ten NZ companies have listed on ASX in the past 18 months, and more are expected to list in the next few years.
NZ companies are increasingly choosing to dual or sole list on ASX during their Initial Public Offering (IPO). Eighteen of 64 NZ companies listed on ASX are now sole-listed on ASX.[ii]
New Zealand-based accounting software star Xero in February 2018 moved to a sole listing on ASX. (Xero was previously dual-listed on NZX and ASX.)
US companies dual-listed on ASX include ResMed Inc (ASX: RMD), News Corporation (ASX: NWS) and Avita Medical Inc (ASX: AVH).
Israeli companies listed on ASX include fintech Splitit Payments (ASX: SPT). More information on international companies listed on ASX is available here.
International companies are partly listing on ASX because of strong demand from local fund managers for Initial Public Offerings (IPO). International listings can aid sector and geographic portfolio diversification for fund managers, and potentially benefit from being valued against similar (peer) companies on ASX, particularly in fast-growing areas, such as Buy-Now-Pay-Later (BNPL) stocks.
Australian companies dual-listed overseas
Dual listing works both ways. Many ASX-listed companies, particularly from the resource sector, are also listed on overseas exchanges. Some ASX-listed mining companies are listed on the Toronto Stock Exchange (TSX), for example.
In the US, an American Depositary Receipt (ADR) allows foreign entities to be traded on US exchanges. ADRs are issued by US depositary banks.
BHP Group (ASX: BHP) and Rio Tinto (ASX: RIO) are among the best-known Australian companies with dual listings. BHP Group PLC and Rio Tinto PLC both trade on the London Stock Exchange (LSE) and on the New York Stock Exchange (NYSE) through ADR programs.
Why international companies dual list on ASX
The main reasons for dual listings on ASX are access to capital, and potential for higher share liquidity and inclusion in an index, such as the S&P/ASX 200 index or S&P/All Technology index.
Once ASX listed, NZ companies can access a pool of investable funds that is more than four times larger than available if only listed on NZX.[iii] Greater access to capital can help companies raise capital to fund investment and growth.
Some Australian fund managers must invest in ASX-listed stocks to meet their investment mandate, meaning they can only invest in NZ or other international companies if they are sole or dual-listed in this market.
Share liquidity is another consideration. Listing on two or more exchanges exposes a company’s shares to a larger audience of potential buyers and sellers. Higher share turnover is important, particularly for fund managers that invest large amounts.
A dual listing can lead to higher liquidity in the company’s shares on its home exchange, and its overseas exchange. A dual listing also exposes international companies to sharemarket indices over ASX companies. The A2 Milk Company, (ASX: A2M), Fisher & Paykel Healthcare Corp (ASX; FPH), and Auckland International Airport are among eight NZ companies in the S&P/ASX 200 index.[iv]
NZ companies in the S&P/ASX All Technology index include Laybuy Group Holdings (ASX: LBY), Pushpay Holdings (ASX: PPH), Volpara Health Technologies (ASX: VHT), and Xero.[v]
Inclusion in prominent sharemarket indices can benefit ASX-listed companies. Index funds, such as Exchange Traded Funds, must hold stocks in the index they aim to replicate. Moreover, active fund managers will hold overweight, neutral, or underweight positions in companies in the benchmark index against which their performance is measured.
The main downside with dual listings is higher costs for companies listed on two or more exchanges. These include exchange-listing fees and potential extra governance, legal, accounting, and investor-relations costs from being dual-listed.
Clearly, dual-listed companies believe the benefits of having exposure to a larger pool of capital, a wider audience of investors, and a higher company profile, outweigh the costs.
What dual listings mean for retail investors
In theory, the price of a dual-listed security should be approximately the same on different exchanges, after accounting for currency and transaction costs.
However, some traders buy a security on the exchange where it is priced lower and sell on the exchange where it is priced higher. This is called “arbitraging”.
Betting that the spread between BHP’s London price and its ASX-listed price would converge if it got too wide (or vice versa) has been a favoured arbitrage trade of hedge funds and proprietary traders over the years.
Arbitraging ensures the spread of securities on different exchanges does not last long and that prices quickly converge. This strategy suits experienced professional traders.
Governance and listing rules are other dual-listing considerations. There are different models for dual listing on ASX. For example, some companies have a primary listing on ASX and NZX, which means they must comply with ASX and NZX listing rules.
Many NZ companies that are dual-listed on ASX have their primary listing on NZX and are listed on ASX as a Foreign Exempt Issuer.
In September 2015, ASX introduced a new category of dual listings: “NZ Foreign Exempt”. This made it easier and cheaper for NZ companies listed on NZX’s main board to dual list here. These companies comply with NZX listing rules and have several exemptions to ASX Listing Rules.
Another model is a primary listing on ASX and listing on NZX as a Dual Listed Issuer. Some Australian banks, for example, trade on NZX through this structure.
Time zones are another consideration. Shares in a dual-listed company might trade in New York, London, and Sydney time zones, meaning the prices change while Australian investors sleep. How an Australian company’s ADRs fared overnight in US trading can be a pointer to how they might trade on ASX during the Australian trading session.
Dividends are another factor. An NZ-listed company that is dual-listed on ASX, for example, will report its earnings and dividends in NZ dollars. The dividend is converted to Australian dollars for Australian investors.
On franking, a NZ resident company may be able to choose to use Trans-Tasman imputation rules to enter the Australian imputation system and gain access to Australian franking credits. Primarily, this is when an NZ company pays Australian income tax.
Income investors who buy ASX-listed international companies should consider seeking advice from a licensed financial adviser, given franking and other issues with dual listings. Use ASX Find an Adviser to search for an adviser near you.
[i] ASX (July 2021). “Selected Securities of Foreign Incorporated Entities Quoted on ASX,”.
[ii] Based on ASX data. At July 2021.
[iii] Orient Capital Institutional Survey, June 2019
[iv] At August 2021.
[v] At August 2021