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How do I invest in the NZ sharemarket from overseas?

Thursday 24th January 2002

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Q: I am a NZ citizen currently working and residing in Singapore. I have been based here for the past six years. I am interested in investing in the NZ stock market. Although I have never invested in stocks before and have little knowledge of what is involved, I have seen indications that the NZ stock market is worth investing in due to comparative high returns of NZ stocks, coupled with the low (yet expected to rise) NZD.

Can I invest in the NZ stock market while remaining here in Singapore? I still maintain a bank account and credit card in NZ, and part own a freehold property in Auckland. I currently have around NZ$6500 in a NZ term deposit maturing September. I also have around 15,000 GB Pounds invested offshore. If investing from Singapore is possible, could you advise me of the procedures required in acquiring a broker, and of conducting such an investment using overseas funds.

Also, is it possible to invest in shares via a credit card? I have a credit limit of about S$30,000 through credit cards here in Singapore. Obviously I would not be so foolish as to use all this credit for a long term investment, however if such funds could be used it would provide excellent liquidity if the funds from my other investments were not able to be freed quickly.

A: Firstly, yes, you can invest in the NZ Sharemarket if you don't live in NZ. You can either use a broker based in Singapore to buy shares in the NZ market on your behalf or you can open an account with a broker in NZ. If you wish to do your own trading via a NZ based online trading website you will be required to have cleared funds in their Cash Management Account before they will accept your first buy order. Any broker will be able to receive foreign currency and transfer into NZ$ for you. When you open an account the broker you choose will provide you with account details to transfer funds to. Some brokers also offer 'euro' accounts i.e. an account denominated in a currency other than NZ$.

Will you be wanting advice on what to buy? If so you should choose a full service broker. Your fees will be higher but you can tell them what you are trying to achieve and they can suggest options which they think will be suit you.

For a list of brokers, head to The New Zealand Stock Exchange site has a page that has links to all broker websites. Read up as much information as possible and decide which broker will be able to provide the sort of services you require.

Once you have purchased shares you can arrange for any dividends you receive to be paid directly to your NZ bank account. All the information relating to this should be sent to you from the registry when you buy shares.

Is your property in Auckland a rental property? This might effect your tax status. I am not a tax specialist but I would suggest you consult one. Depending on whether or not you file NZ tax returns every year, they can advise on the best and most efficient tax structure, which could help you to make use of the imputation credits available to residents or if you wish to receive supplementary dividends paid to non-resident shareholders.

There are no brokers in NZ that accept share orders to be paid for by credit cards. Unfortunately, credit card company's charge merchants a 2% fee for any purchases - this is usually more expensive than brokerage so they would effectively be subsidising your share purchase.

When you mention 'comparative high returns' of NZ shares, exactly what are you referring to? NZ company's usually pay out a large percentage of the company's profit in dividends. This means that the market has a rather high yield when you compare it to listed companies in countries like America.

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