Heard in Asia: Planning to Invest Abroad? First, Study the Particulars
interactive.wsj.com
July 20, 2001
By SARAH MCBRIDE
Staff Reporter of THE WALL STREET JOURNAL
Investing in a market outside your home turf can be rewarding. It can also be difficult and expensive. Here's a country-by-country guide for various Asian markets, plus some tips on what to watch for.
Australia
Most brokerages can arrange stock purchases and sales for Australian companies. HSBC Securities in Hong Kong charges various fees depending on the size of the account. For example, it takes a 0.5% commission, plus a 1% brokerage fee for the small investors. If you go directly to a brokerage in Australia, you can skip the 0.5% commission, and probably get a lower brokerage fee. Rivkin Discount Stockbroking, for example, says it accepts overseas customers. On a trade of between 30,000 Australian dollars and A$80,000 (between US$15,300 and US$40,800) Rivkin charges A$72.50 in commission and taxes. Open your account online, and that fee drops to $49.50. No matter where you buy your Australian shares, make sure you don't pay the 0.15% stamp tax -- Australia dropped this on July 1.
China
If you want to buy Class B shares listed in Shanghai or Shenzhen, which trade in foreign currencies, your best bet is doing it from outside the mainland. Celestial Asia Securities Holdings of Hong Kong and HSBC are two brokerages that can arrange the investments, though HSBC can only provide the service to Hong Kong residents. By the end of the month, Boom.com will be able to sell mainland shares as well. For online customers, Celestial Asia charges a 0.5% commission for Shanghai and Shenzhen, and both markets have a stamp duty of 0.3%. There are also small clearing fees and other charges. Completing the paperwork that allows an investor to trade Class B shares can take one to two weeks, HSBC says.
Hong Kong
This has to be one of the easiest Asian markets in which to invest. Not only are brokers accustomed to dealing with clients based outside Hong Kong, but most online brokers in Hong Kong also will accept overseas clients. The commission is usually around 0.25% for online trades. Other fees such as a stamp duty of 1.25 Hong Kong dollars (16 U.S. cents) per HK$1,000 transaction and a handling fee of 0.01% can add a few dollars to the transaction. Costs will be lowered once Hong Kong deregulates fees in April 2002, brokers say. Some Hong Kong brokerages firms include 2cube, Boom.com, Charles Schwab Hong Kong and Celestial Asia.
Japan
Nomura and Nikko, the two big brokerage firms Japan contacted by The Asian Wall Street Journal, said they cannot sell to nonresidents. The firms give residents varying conditions. Nomura said fees for transactions over 50 million yen ($403,600) are negotiable, while those under 50 million yen typically carry fees of around 0.4%. Nikko said its fees range from 0.38% to 1.15%, depending on transaction size.
Malaysia
Because of currency restrictions, it can be tough to find a broker that will sell Malaysian shares. Try a Singapore broker such as GK Goh, or go right to the source. TA Securities in Kuala Lumpur, for example, says opening an account from outside Malaysia is no problem. You will need to find a notary public where you live to validate your signature on account-opening documents. The brokerage will find someone to hold a trading license on your behalf. That costs 10 ringgit ($2.63). As for commission, TA says it charges 0.75% for trades below 100,000 ringgit. Other small charges include a 0.04% clearing fee.
Philippines
Calling up a broker here about opening a retail account first elicits surprise, but then an almost desperate willingness to help. At ATR Kim Eng and AB Capital Securities, brokerage charges are 1% per transaction, but both firms indicated these would be negotiable for a larger amount or for a longstanding customer. Government taxes and fees vary according to the size of the transaction.
Singapore
Again, it is usually no problem for a nonresident to open an account. As with Malaysia, the signature on your account-opening documents needs to be notarized. GK Goh cited fees of 0.4% for online trades in Singapore stocks, and 0.5% for regulator trades. There are also other small fees, such as a clearing fee of 0.05%. DBS Securities also accepts overseas accounts.
South Korea
There is no legal obstacle to a foreigner opening a Seoul trading account. The real problem here is language -- finding a broker who can handle a request in English. For those without language issues, Daishin Securities charges 0.45% for transactions, and Dongwon charges 0.5%. There are also small tax and registration fees.
Taiwan
Unless you're a resident, it is difficult to cut out the middleman. According to Julian Liu, head of international finance at Polaris Securities, Taiwanese brokerage firms are used to dealing with overseas institutions, but not individuals. Technically, an individual could open an account, but legally they would have to travel to Taiwan to do it in person. Polaris's commission is 0.1425%. Other brokerages, such as Capital Securities and National Securities, said they couldn't handle a foreign account.
Other things to watch out for when buying overseas:
Lot Size
Many markets, such as Hong Kong, Singapore and Japan, normally sell shares in set quantities. For example, Hong Kong's Hutchison uses a lot size of 1,000 shares, which at the recent price of HK$76 per share, represents about US$10,000. Trading in odd-sized lots is possible, but difficult. In Japan especially, "the lot size is so big, it's not portfolio friendly," says Norman Chan, head of investment research at the Allen Perkins Group in Hong Kong. Take NTT DoCoMo, with a lot size of one share -- that's about US$2 million.
Currency Transaction Costs
Most currencies fluctuate, affecting the value of foreign investment. Sometimes buying or selling a particular currency itself can add 5% or more to the cost of your transaction. Anyone buying or selling Philippines stock right now is probably painfully aware of the 4%-5% bid-offer spread for the peso.
Deposits
Many brokerages will ask foreign investors for a deposit. GK Goh in Singapore normally asks for 10,000 Singapore dollars (US$5,464) or more, for example; AB Capital in Manila asks for 50,000 pesos ($929).
Account-Maintenance Fees
Some brokerages charge yearly fees for the privilege of having an account with them; sometimes, they're called custody fees. In Hong Kong, for example, HSBC charges HK$200 to HK$300 a year, depending on the size of the account.
Hassle
Are the extra details -- notaries, wire transfers, phone calls -- worth it? Only the investor can decide. For someone interested in just one or two foreign markets, forging a relationship with a broker in those countries can pay off. For someone interested in multiple markets, it's probably worth consolidating an account with a large brokerage that can handle multiple markets. Or check out the online brokerages -- Boom.com, for example, is open to investors throughout Asia and offers trading in eight markets and will soon expand to 12.
-- Yuhong Qian, Meeyoung Song and Hiroko Fujita contributed to this article.
Write to Sarah McBride at sarah.mcbride@awsj.com |
