WSJ on opening foreign brokerage acounts

Wall Street Journal

Investors Europe’s Managing Director is quoted in an article on the Wall Street Journal, “How to Hire Brokers Abroad” … It’s Getting Easier for Individuals to Open Accounts in Foreign Lands; Finding Decent Stock Tips in Egypt


May 19, 2007; Page B1

It’s getting easier for you to open a brokerage account — in Botswana.

And not just there, but also in many bigger and more important markets, ranging from London and Hong Kong to Auckland, New Zealand, and Cairo, Egypt. Around the world, local banks and brokerages have been rolling out online services that let Americans and international individual investors open accounts to buy and sell foreign stocks directly.

Their goal is to cash in on the booming interest world-wide in investing in foreign countries.

Americans alone invested $40.3 billion in foreign stocks in March, second only to the peak of $48.7 billion in December. That isn’t a surprise, given that foreign stock markets have outperformed the U.S. recently. In addition, foreign economies this year have stayed strong even as the U.S. market has slowed.

Of course, U.S. investors could always buy shares of the more than 2,000 big foreign companies — such as BP PLC, Novartis AG and Rio Tinto PLC — that trade on U.S. stock exchanges as American depositary receipts. But in many cases, the real action has been in the smaller names among the world’s 50,000 public companies. Just as in the U.S., small and midsize companies have outperformed bigger ones in many overseas markets, and they represent a purer play on foreign economies.

In Hong Kong, a company called Boom Securities gives Americans direct trading access to every major market in Asia, including Shanghai and Shenzhen, home to China’s “B” shares, the ones available to foreigners. Cairo-based EFG-Hermes provides online trading, in English, in both Egypt and the United Arab Emirates, and offers broker- assisted trading in markets from Morocco to Oman to Turkey.

A few years ago, trading overseas directly “would have been very difficult,” says Pierre Boulle of investorseurope, a Gibraltar-based firm providing online access to a score of markets stretching from London to Lithuania. “Nowadays, with the Internet, it all works very well.”

Neither the Securities and Exchange Commission nor the Internal Revenue Service has rules on where U.S. investors may open an account. Your only obligation: report any income or profits to the IRS at tax time.

The SEC does prohibit unregistered brokerages from soliciting customers in the U.S. For that reason, foreign firms don’t advertise for American clients. Instead, you must approach the firms. And not

all of them will accept American clients. Among those that do, sign-up can be surprisingly easy. Brokerage firms often require just a completed application (typically available online), a certified copy of your passport and a utility bill to verify your identity and address.

It isn’t a game for wimps. While risks in developed markets such as London, Paris or Tokyo are little different from those in the U.S., investments can sour quickly in unexpected ways in other markets. It makes sense only for investors with enough money to spare that they can afford to lose a chunk of it if their investments fall apart several time zones away while they are asleep.

For starters, currency-exchange rates can swing, driving down the value of an investment in dollar terms. At the same time, government meddling — or worse — can turn a market upside down. In Thailand last year, the government tried to impose restraints on the flow of foreign money, sending Thai stocks plummeting 15% in one day. And last summer in Lebanon, the conflict with Israel there sent stock prices tumbling and shuttered the Beirut exchange for days.”