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Simplifying share trading on the international stage

PERTH investors wanting to buy international shares have, until recen-tly, faced major logistical challenges.

However, investors now have a range of options if they want to buy stocks listed on the New York Stock Exchange, the NASDAQ and other international exchanges.

Indeed, investors have a similar range of options for trading international shares as they do when trading domestic shares.

They can use a local full-service broker, opt for a global broking house, or use an online broker like Commonwealth Securities or TD Waterhouse.

The ASX has made it easier by establishing ASX World Link. The aim of this service is to facilitate Australian investors trading international shares, as well as overseas investors trading Australian shares.

Australian broking firms are progressively signing up for ASX World Link, and the first in Perth to launch the service was Mortimer & Chua.

Its clients can buy and sell a selected range of NYSE and NASDAQ securities in real time, settle in Australian dollars and have their holdings included in their CHESS statements.

“The procedure for buying US shares like Microsoft, Cisco Systems and General Motors is the same as for trading Australian shares,” Mortimer & Chua’s Daniel Smith said.

Another Perth-based broking firm, Paterson Ord Minnett, has gone further with the launch of its Global Markets service.

While Paterson uses ASX World Link, it also has established its own links with various offshore broking firms. This gives it the capacity to buy and sell stocks in all major international markets.

Paterson gives clients the option of conducting their overseas trades with an Australian-dollar account (with Paterson arranging the currency conversion) or in foreign currencies.

Paterson’s Nicholas Mace said the firm also could provide clients with recommendations and advice on international stocks, using research from its 50 per cent owner, JPMorgan.

Another option is to use a global broking firm like Salomon Smith Barney, whose Perth office has trading links around the world.

Salomon’s Kevin Russeth said the firm offered a 24-hour trading capability and could provide a live Internet feed so Perth investors can track movements in their international stocks.

Investors with a large international portfolio can even appoint a Salomon’s manager in, say, San Francisco to look after their US stocks

However, Mr Russeth said the preferred option for most people was to invest in an international mutual fund instead of acquiring just two or three international stocks.

Several non-advisory online brokers allow clients to trade international shares via the Internet.

ComSec, Australia’s largest online broker, allows clients to trade the three major US exchanges (New York, NASDAQ and American) and the Hong Kong stock exchange.

Clients also can trade Canadian and UK stocks via the telephone.

ComSec’s Steve Mildred said trading in international shares had grown rapidly over the past year and was approaching 10 per cent of ComSec’s total trades.

To assist clients placing orders, many brokers have staff working during US trading hours. Alternatively, clients can place orders during local business hours and they will be processed once the US market opens.

Not surprisingly, the cost of trading international shares is higher than for local trades. ComSec charges $109 per international trade (plus an annual $120 custody fee) compared with $31 for a local Internet trade or $54 for a local telephone trade.

Mr Mildred said buyers of international shares often were people who had lived or worked overseas.

The information technology and biotechnology sectors were popular, reflecting the lack of well-established Australian companies in these sectors.

Australia comprises less than 2 per cent of global sharemarket value, and investors with a global perspective are able to achieve greater geographic and industry diversification.

They also face an added element of risk, since currency fluctuations will affect their returns. Specifically, a rising $A will reduce the returns from offshore investments, while a falling $A will boost returns from offshore.

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