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Passive income: Buying foreign companies’ shares in Ukraine

How to buy shares of foreign issuers in Ukraine. Photo: bitcointalk.com

How to buy shares of foreign issuers in Ukraine. Photo: bitcointalk.com

Since the beginning of this year, the US stock index S&P 500, the basket of which includes the stocks of the 500 major companies in the country, has fallen by 8.1%. Another index, NASDAQ Composite, has lost 12.5%. About the same decline is now observed in European stock markets.

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Volatility (variability) is a characteristic feature of any stock market: ups are constantly replaced by downs. Investors in the West and East have long since learned to work in such conditions.

Ukrainian companies’ shares are now practically not traded in Ukraine. However, Ukrainians have access to the shares of the foreign issuers. This process is not very simple and often requires at least minimal specialized knowledge. However, now banks have begun to be engaged in it as intermediaries, so it becomes much easier to buy and sell foreign shares. The Page explains how to do it.

1

Independent purchase of foreign shares

From February 2019, a Ukrainian does not need to obtain a license from the National Bank for investing abroad in order to acquire shares of a foreign issuer. Now there are "e-limits"—restrictions on the amount of funds that can be transferred for certain purposes abroad. From January 2021, individuals can invest abroad or transfer to a foreign account up to 200,000 euros per year.

However, a Ukrainian cannot directly buy shares on a foreign exchange. They need an intermediary broker with whom they need to open an account (by visiting a broker or remotely). The client of such a broker gets the opportunity to buy shares at any time and in any quantity, control the placement of their funds, trade through Internet trading or give instructions to the broker. Their rights are protected by the laws of the country where the account is opened.

Also one can find many offers to connect to trading on foreign exchanges on the Internet. Most of these proposals are about the fact that actually a non-resident whom a Ukrainian transfers their money to will actually trade shares on the stock exchange. A foreigner is the formal owner of all assets that are acquired on the stock exchange. Therefore, the property rights of a Ukrainian are not protected.

It should be noted that since last year, the shares of several dozen foreign issuers (Apple, Amazon, Facebook, Microsoft, VISA, etc.) have been officially allowed to be traded in Ukraine. They can be bought and sold through a Ukrainian broker. A complete list of such shares can be found here.

2

Alfa-Bank Ukraine’s service for working with shares

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At the end of December last year, Alfa-Bank launched in test mode a service for trading securities of Western companies in its mobile application Sense SuperApp (section "Investments").

It is reported that all securities trading transactions are in accordance with Ukrainian legislation: settlements are made in hryvnia, income is taxed (the bank pays them for the client).

The companies’ shares that can be bought through the bank's application are admitted to trading on the Ukrainian stock market. The minimum number of shares in a transaction is not limited. The average cost of one share of Western companies admitted to trading in Ukraine is about $150 or 4,000 UAH.

Purchase and sale of shares are carried out at prices corresponding to the current quotes on the international exchanges. The trading session is available on weekdays from 16:30 to 23:00 Kyiv time.

The bank promises not to charge a commission for purchasing and selling shares until the spring of 2022.

During the pilot period that lasted from December 28 to January 10, the trading volume amounted to 18 million UAH. The shares of Apple, Coca-Cola, Intel, and Microsoft were the most popular among the clients. About 80% of clients purchased 1-2 shares, the average check for transactions amounted to UAH 9,700 UAH.

3

Monobank’s service for working with shares

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On January 24, virtual monobank started beta testing of the application mono invest for buying shares. So far, it is available to selected users, but in March it is planned to open access to everyone.

So far, the shares of the companies from the S&P 500 list are available, and from February 1, the bank wants to add shares of the most popular ETFs (funds listed on the stock exchange) to them.

The service feature is that monobank does not transfer shares for clients to accounts in Ukraine, but provides them with the opportunity to conduct transactions through the international broker Exante.

So far, the service takes 0.01% of the amount of the sale and purchase transaction (but not less than $0.01). From April 1, the commission charge will increase to 0.3% (at least $1).

Opening and maintaining a brokerage account is free. Money is credited to this account from the client's dollar card.

There is no requirement for a minimum balance on a brokerage account. There is no commission charge for withdrawing money from an account to a dollar card of a monobank client. But the bank pays income tax for the client.

The commission fees are automatically charged from the client's hryvnia card when buying and selling shares. Trading sessions are held on the days of exchange trading from 16:30 to 23:00.

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