February 2002 Volume 83 Number 2 "serving the protectors"
Shares
By Ruth McCance, ASX Investor Education

How to find those overseas bargains

The Australian sharemarket has enjoyed a long run of strong gains. Five years ago, roughly the same number of companies as there are now were worth only half of what the market is valued at today. That is strong capital growth – in anyone’s language.

However, not all investors necessarily want to invest in the domestic market at a particular time, for a variety of reasons. Yet, they might still want shares. Investors could be looking for exposure to a foreign currency, or to certain types of companies that enjoy higher valuations in other markets. They might simply want access to some of the world’s largest companies.

Names such as Microsoft, IBM, Intel, General Motors and Singapore Airlines, which are as well known here as on their home markets, cannot be bought on the Australian Stock Exchange. There are as many reasons for investing in international companies as there are for getting into their Australian counterparts. And it is now as easy to buy and sell international shares as it is to buy Australian ones.

Several stockbrokers offer access to foreign companies, often through their own arrangements with brokers overseas. However, investors might find it easier still to go through a broker who has signed up to the ASX World Link service.

ASX World Link is designed to simplify the process, in terms of both broker dealings and currency, while maximizing the security and convenience of the transaction.

It is as easy and familiar as buying Telstra or BHP shares here.

From the investor’s point of view, he or she needs only to deal with an Australian broker and deal only in Australian dollars.

You place an order with your Australian broker, and pay in Australian dollars. Your ownership or “interest” in international securities (shares) is held in the same convenient way as ASX-listed shares – through CHESS.

You will receive statements from CHESS to confirm your holding. Also, any dividend payments will be made to you in Australian dollars. This is useful, as dividend payments could be smaller amounts, which might be expensive to convert into Australian dollars from another currency.

You will need to use a stockbroker who is registered for the ASX World Link service. A list of participating brokers and the securities available to investors can be found at www.asx.com.au.

What can you buy and sell? The list will grow, but so far includes a selection of major US shares listed on NASDAQ, the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX).

You can also buy so-called “Exchange Traded Funds” which operate like a managed fund following a particular index. These might be especially useful for investors looking for general sharemarket exposure overseas, but who are reluctant to concentrate on a specific company. Since December 20, you can also buy top Singapore stocks and other international links will follow.

The rewards are obvious: access to some of the world’s largest and most dynamic companies, and access to the world’s largest economy, the USA. Using ASX World Link, there is the added bonus of dealing with your own broker in Australian currency with a convenient settlement and dividend process.

The risks include all those that apply to trading shares locally, plus currency risks. The idea is to withstand short-term setbacks to gain long-term growth. As always, research is crucial.

To find out more about ASX World Link, attend ASX’s major educational event, ASX Investor Day, which will be held at the Adelaide Convention Centre on February 16. This one day event will include practical demonstrations and feature well-known and experienced speakers in the finance industry, including David Koch, Noel Whittaker, Chris Caton and Roger Montgomery: an excellent opportunity to learn more about the share market first-hand.

This article was written by the ASX Investor Education unit. It is not intended as investment advice or a recommendation of specific securities. For more information, phone the ASX on 1 300 300 279, or go to the ASX website, asx.com.au.

This article contains general information only. It is not intended as and must not be relied upon as investment advice. You should consult a licensed professional advisor prior to making any investment decision.

The information contained in this article is provided in good faith and derived from sources believed to be accurate as at the date of publication. However, no warranty of accuracy or reliability as to such information is given. Australian Stock Exchange Limited and its associated and related companies will not be liable for any loss or damage arising in any way from or in connection with anything provided in or omitted from this article or from any action taken or inaction in reliance on the article. This article does not contain an invitation or offer to invest in securities or other financial products and nothing in this article is to be taken as ASX endorsing promoting or expressing any opinion on any securities or other financial products.

©Australian Stock Exchange Limited ABN 98 008 624 691. All rights reserved.

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