Overseas shareholders trading aussie shares and vice versa

[ozambersand]

I never really realised what an effect dollar parity has on share trading. So have a few questions to check that I am understanding the full impact and implications.

If an overseas company/individual owns shares in an Australian company, am I right in saying that a falling Aussie dollar makes their shares less valuable?

For example, say an Aussie stock (eg CPU) was selling at $9.65 on the ASX on 7/8/08 when the exchange rate for the US dollar was .9109 it would have cost a US trader US$8.79 for the share.

However, now that the exchange rate is 0.6983 if they sold that share today at $8.41 they would actually get back US$5.87. Hence a 8.9% fall for Australian CPU share holders would relate to a 33.2% fall for a US holder of those shares.

Are my calculations correct?

I assume therefore that the opposite would be true for Australians holding shares in OS companies. Hence for Superfunds that have International shares, would I be right in saying that the falling aussie dollar will make them more profitable?

Do traders use currency fluctuations much?

 

[seasprite]

I never really realised what an effect dollar parity has on share trading. So have a few questions to check that I am understanding the full impact and implications.

If an overseas company/individual owns shares in an Australian company, am I right in saying that a falling Aussie dollar makes their shares less valuable?

For example, say an Aussie stock (eg CPU) was selling at $9.65 on the ASX on 7/8/08 when the exchange rate for the US dollar was .9109 it would have cost a US trader US$8.79 for the share.

However, now that the exchange rate is 0.6983 if they sold that share today at $8.41 they would actually get back US$5.87. Hence a 8.9% fall for Australian CPU share holders would relate to a 33.2% fall for a US holder of those shares.

Are my calculations correct?

Your calcs are correct , you would have benefited if the exchange was the other way around
eg buy at A$9.65 @ 0.6983 = US$6.74
sell at A$8.41 @ 0.9109 = US$7.66 .
You are better buying when the A$ is at a low to US$ so that you get more for your $
and are better selling when the A$ goes higher to US$ whilst taking into account the share price

 

[ozambersand]

OK, thanks for confirming that.

So if you held Super and half the super was in Aussie shares and half in international, would you be better getting the super fund to shift a large proportion to international when the aussie dollar is high and shifting it back to aussie when the dollar falls?

Or isn't the difference enough to make a difference.

 

[seasprite]

OK, thanks for confirming that.

So if you held Super and half the super was in Aussie shares and half in international, would you be better getting the super fund to shift a large proportion to international when the aussie dollar is high and shifting it back to aussie when the dollar falls?

Or isn't the difference enough to make a difference.

Thats a loaded question , I think no one except yourself can answer that one .