Tencent ADR (TCEHY) vs Hong Kong Shares (00700): What’s the Difference?

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When investors consider buying Tencent stock, they often face a core question:

Should you choose the ADR traded in the US (TCEHY) or invest directly in the Hong Kong-listed shares (00700)?

The fundamental differences between these two securities lie mainly in the trading venue, currency, and asset nature. Understanding these distinctions is the first step to making an informed decision — this article will guide investors through a detailed comparison.

Key Takeaways

• Tencent stock comes in two forms: Hong Kong shares 00700 and US ADR TCEHY. 00700 trades on the Hong Kong exchange in HKD; TCEHY trades in the US in USD.
• Buying 00700 means you directly own a piece of Tencent Holdings. Buying TCEHY means you own a certificate that represents Tencent shares.
• 00700 dividends are paid in HKD and are generally not subject to dividend withholding tax. TCEHY dividends are converted to USD and taxed according to US rules.
• 00700 has very high trading volume and excellent liquidity but incurs stamp duty. TCEHY has lower volume, wider spreads, and an annual custody fee.
• The choice depends on your preferred trading venue, currency, and considerations around liquidity and taxation.

Trading Market and Time Differences

The first major consideration when choosing Tencent stock is the trading market. This not only determines trading hours but also indirectly affects the regulatory environment and trading characteristics.

Hong Kong Shares 00700: Hong Kong Stock Exchange

Tencent Holdings (00700) is primarily listed on the Hong Kong Stock Exchange (HKEX), one of the world’s most active and well-regulated markets. As a major component of the Hang Seng Index, its trading activity is concentrated during Asian hours.

Hong Kong Stock Trading Hours (UTC)

• Opening: 01:30 UTC
• Closing: 08:00 UTC

For investors familiar with Asian markets, trading 00700 during Hong Kong hours provides the best liquidity and most immediate price discovery.

ADR TCEHY: US OTC Market

In contrast, Tencent’s ADR (TCEHY) trades on the US Over-the-Counter (OTC) Market. Investors must understand that the OTC market is not a centralized exchange like the NYSE or NASDAQ but a network of broker-dealers.

The OTC market has multiple tiers to differentiate reporting and regulatory standards. Tencent ADR (TCEHY) trades on the highest tier — OTCQX.

• OTCQX: Strict financial standards and corporate governance requirements — considered the premium OTC tier.
• OTCQB: For venture-stage companies, requiring audited annual reports.
• Pink Sheets: The least regulated tier.

Many large international companies list on OTCQX to give US investors easier access at lower cost — not because of any fundamental issues. Tencent’s presence on OTCQX reflects its status as a global top-tier company.

Nature of Tencent Stock: ADR Certificate vs Original Shares

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Beyond the trading venue, investors must understand the fundamental difference in asset nature — whether you become a direct shareholder or hold rights indirectly.

Hong Kong Shares 00700: Direct Ownership of Ordinary Shares

When investors buy Tencent stock (00700) on the Hong Kong exchange, they purchase “ordinary shares” issued by Tencent Holdings Ltd. This means they directly become shareholders of the company and own a portion of it.

Meaning of Direct Ownership Your name is recorded in the company’s shareholder register, and you directly enjoy full shareholder rights, such as voting at general meetings.

This direct ownership structure is the simplest and most transparent relationship between investor and company.

ADR TCEHY: Indirect Ownership via Depositary Receipt

Unlike direct shares, TCEHY stands for “American Depositary Receipt” (ADR). It is not the Tencent stock itself but a certificate traded in the US that represents ownership of foreign company shares.

The process works as follows:

1. A US “depositary bank” first purchases large amounts of Tencent shares (00700) on the Hong Kong market.
2. The bank then issues corresponding ADR certificates (TCEHY) in the US, backed by those shares.
3. US investors trade these bank-issued certificates.

Thus, holders of TCEHY are legally owners of the certificates, not direct Tencent shareholders. The actual shares are held in custody by the depositary bank. However, ADRs are designed to track the underlying share price, and dividends and other rights are passed through to investors via the bank.

The number of underlying shares each ADR represents is called the “conversion ratio”. For Tencent, it is straightforward:

This means one TCEHY share is theoretically worth the same as one 00700 share.

Trading Currency and Exchange Rate Risk

When choosing an investment vehicle, the trading currency is a key factor affecting final returns. Investors must consider not only price movements but also currency fluctuations.

Hong Kong Shares 00700: Priced in HKD

Tencent Holdings (00700) trades and settles in Hong Kong Dollars (HKD). For investors whose primary currency is HKD, this is the most straightforward choice with no currency conversion needed.

However, for those holding USD or other currencies, Hong Kong’s unique “linked exchange rate system” comes into play.

Impact of the Linked Exchange Rate The Hong Kong Monetary Authority keeps the HKD pegged to the USD within a very tight band of 7.75 to 7.85 HKD per USD. This means the HKD is highly tied to the USD. When the Fed changes rates, Hong Kong must follow to maintain the peg.

This system has dual effects:

• Advantage: For USD holders, direct FX risk when investing in 00700 is extremely low due to the stable peg.
• Disadvantage: For holders of other currencies (EUR, JPY, etc.), while HKD is stable vs USD, they still bear their home currency vs USD risk.

Additionally, non-HKD investors incur currency conversion costs when buying 00700. Fees vary by broker and directly impact total cost.

To manage cross-market currency needs efficiently, some investors use fintech tools like Biyapay, which offer competitive rates and lower conversion fees.

ADR TCEHY: Priced in USD

Tencent’s ADR (TCEHY) trades and settles entirely in US Dollars (USD).

For investors based in the US or who manage global assets in USD, this provides significant convenience.

Direct USD Advantage Investors can buy TCEHY directly with USD funds — no conversion needed. This eliminates both the hassle and any conversion fees or spreads. Proceeds from selling are also in USD, ready for immediate redeployment.

The flip side is risk. For non-USD investors, buying TCEHY fully exposes the investment to USD currency risk. If the investor’s home currency appreciates against the USD, actual returns in home currency may shrink or turn negative even if TCEHY rises.

Choosing TCEHY therefore means betting on both Tencent’s performance and the future path of the USD.

Dividend Payment and Tax Treatment

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Dividends are an important part of shareholder return, and the amount investors ultimately receive varies significantly depending on the stock type, currency, and tax rules.

Hong Kong Shares 00700: Dividends Paid Directly in HKD

Holders of 00700 receive dividends directly from Tencent in Hong Kong Dollars (HKD), based on the company’s annual profit distribution policy.

Recent Tencent dividend history:

Tax-wise, Hong Kong is extremely investor-friendly for dividends.

Hong Kong follows a “territorial source taxation principle” — only profits sourced in Hong Kong are taxed. Since companies already pay profits tax before distributing dividends, shareholders generally face no dividend withholding tax.

This benefit applies to all shareholders regardless of nationality or residence, making Hong Kong one of the most dividend-friendly markets globally.

ADR TCEHY: Bank Converts to USD Before Payment

The dividend process for TCEHY holders is different and handled by the depositary bank:

1. Tencent pays dividends in HKD to the depositary bank.
2. The bank converts the HKD to USD.
3. After deducting fees, the bank distributes the remaining USD dividends to TCEHY holders.

These fees typically include “currency conversion costs” and possible administrative charges. Thus, the actual USD dividend per share received is slightly lower than the theoretical amount at spot exchange rates.

For USD-based investors, this automatic conversion is convenient. Received USD can be directly reinvested in other US stocks or managed via multi-currency tools like Biyapay. Tax-wise, US investors treat these USD dividends as investment income and report them under US tax rules.

Liquidity and Trading Cost Comparison

Liquidity and trading costs directly impact total returns. Investors must carefully evaluate these differences when choosing how to access Tencent stock.

Hong Kong Shares 00700: High Liquidity with Stamp Duty

As the primary listing, 00700 has enormous trading volume and excellent liquidity. Large orders can be executed quickly at market prices with very tight bid-ask spreads.

Trading costs consist of:

• Broker commissions: Vary by broker and trade size — many offer tiered pricing.
• Stamp duty: Mandatory Hong Kong government tax — currently 0.1% for both buyer and seller.

ADR TCEHY: Lower Liquidity with Custody Fees

In contrast, TCEHY on the US OTC market has much lower liquidity than the Hong Kong listing. Lower daily volume can lead to wider spreads — a hidden cost for frequent traders.

Cost structure differs:

• Broker commissions: Similar to other US securities.
• ADR custody fee: Unique to ADRs — the depositary bank charges an annual fee (typically $0.02–$0.05 per share) for administration, usually deducted directly from dividends.

Practical Tip Due to exchange rates and market sentiment, TCEHY can trade at a slight discount or premium to 00700. Investors can track this premium/discount in real time using tools like “Tencent Quotes.” For those managing USD for ADR trading, platforms like Biyapay help streamline transfers and reduce costs.

In summary, the choice between 00700 and TCEHY depends on individual circumstances. The table below clearly highlights the core differences for quick reference.

Investors should choose the Tencent stock that best fits their needs. For Asia-based investors seeking high liquidity, 00700 is the top choice. For US-based investors comfortable with their brokers, TCEHY is viable but comes with lower liquidity and wider spreads.

FAQ

Is one share of TCEHY worth the same as one share of 00700?

In theory, yes — one TCEHY represents one ordinary share of 00700. However, due to market, currency, and sentiment differences, a small discount or premium often exists. Investors should factor this into their decision.

Why is TCEHY less liquid than 00700?

TCEHY trades on the US Over-the-Counter (OTC) market, not a major exchange. OTC volume is typically far lower than the primary listing on the Hong Kong Stock Exchange, resulting in lower liquidity and potentially wider spreads.

What extra fees come with holding TCEHY?

In addition to broker commissions, ADR holders should watch for the ADR custody fee.

The depositary bank charges an annual fee (usually $0.02–$0.05 per share) to cover administration, typically deducted directly from dividends.

Which is better for US investors?

For investors who trade in USD and primarily use US brokers, TCEHY offers direct convenience and eliminates currency conversion hassles. However, they must accept lower liquidity and potentially wider bid-ask spreads.