Sid should turn to German market

But he is likely to get a shock when he comes to sell
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The Independent Online

Remember Sid? Unless you are a very new investor, you are likely to recall the eponymous individual who epitomised the Thatcherite hopes for a wider share-owning democracy. Sid was the ordinary man who would purchase British Gas shares. If he is still alive, well and solvent, then I hope he is trawling the German market.

Remember Sid? Unless you are a very new investor, you are likely to recall the eponymous individual who epitomised the Thatcherite hopes for a wider share-owning democracy. Sid was the ordinary man who would purchase British Gas shares. If he is still alive, well and solvent, then I hope he is trawling the German market.

In Germany the privatisation bandwagon is beginning to roll in earnest. The latest offering for Fritz, or whichever cousin Sid has in the heart of Euroland, is Deutsche Post. This is an issue the German government seems determined should go with a swing. Profits for retail investors seem assured, but just how easy is it for UK investors to leap aboard the bandwagon?

There is little doubt that some UK securities houses will be vigorously promoting this particular issue. Quite right too, but private investors in overseas shares are likely to get a shock when they come to carry out a sale later, or even if they retain a holding in their portfolio. Foreign shares remain an expensive trading counter for most UK investors, despite the fact that few countries outside the UK levy stamp duty, a tax which threatens to make London uncompetitive in securities trading terms.

There is also the hassle ofdealing outside your home market. You have to find a broker (perhaps paying twice for the privilege), while there are important settlement considerations, not to mention the issue of custody after a purchase. Try holding Deutsche Bank shares in certificated form and you will find it is not a serious option.

Remember, too, that when the dividends come to be paid, they will - as like as not - be in a currency you have no wish for. Banks will extract money from you for the privilege of turning dividend cheques into pounds sterling, not to mention the charges that you are likely to face when you buy currency to finance the original purchase.

Bear in mind, too, that there is no common trading platform in Europe. No wonder stock exchanges have been launching bids for each other or entering into merger discussions. Europe is wide open to harmonisation. Unsurprisingly, those European investors who seek to invest overseas are most likely to do so in America, trading US stocks rather than dealing across the borders of the European Union.

There is plenty happening aimed at creating a more investor-friendly environment within Europe. Tradepoint, the small rival to the London Stock Exchange, is now trading in 300 European blue chip stocks, backed by the US brokerage giant Instinet and a number of investment banks. Unfortunately, this is only for institutional clients but coverage for retail customers should follow.

Jiway, a London exchange backed by Morgan Stanley and the OM Group - owner of the Stockholm Stock Exchange and the bidder for the London Stock Exchange itself - starts trading 6,000 European stocks this month through retail brokers. Expect more initiatives to follow. But do not expect costs to come down too quickly - or settlement and custody problems to be eradicated immediately.

Which brings us back to Deutsche Post, of which between a quarter and a third will be made available to investors. Much of this will be offered to the retail market here and elsewhere in Europe. The stock will be listed on the Frankfurt Stock Exchange and there are plans for additional listing on all other German exchanges. Yes, Germany still has a number of different exchanges.

Deutsche Post is being priced to sell. It will be offered at a discount to comparable rivals and should prove attractive to private investors. But remember the problems that will arise when you invest, cash the dividends and come to sell. Reform of trading and settlement systems in exchanges must become more of a priority in a global investment world.

* Brian Tora is chairman of the Greig Middleton Asset Allocation Committee

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