Trade in French shares is frankly expensive: For those who fancy a Gallic flutter, Gail Counsell has a few words of caution

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The Independent Online
EUROPEAN currencies are once again in a spin, with the franc under pressure.

Travellers planning to convert currency to francs should hold back. The risk of a small rise in the cost is outweighed by the possibility of a big drop in the event of devaluation.

British investors interested in the forthcoming stream of French privatisations have to weigh the currency risks and the extra cost of dealing against possible gains.

The biggest disincentive to individuals are the dealing costs. Those who want to purchase French stocks generally have to use two sets of brokers, and thus pay two lots of commission - often at a higher rate than the typical 1.6 per cent for buying shares on the London Stock Exchange.

Paul Killik, of the boutique broker Killik & Co, said his firm charged 2.5 per cent, with a minimum fee of pounds 75, on the first pounds 5,000 invested on the Bourse. On top of that the French broker's fees would add another

1 - 1.5 per cent.

He defended the charges because of the extra work involved. 'We have to see the trade through manually, confirming it by fax to the French broker, and so on.'

A further fee, of perhaps pounds 15, may also be payable for converting sterling into French francs, to settle the account. And there will also be the need to pay around pounds 30 a year to have a depot - in France individuals do not receive share certificates; the shares are held in trust by a bank or similar organisation.

Using a British broker with links to a French broker, such as NatWest Stockbrokers, may help to cut costs, as they will have economies of scale. At NatWest, for example, dealing charges to an individual on French stocks will be around 1.65 per cent, plus up to 0.7 per cent for the French broker - which it says will not necessarily be its own subsidiary. That's cheaper than Killik, but there is a high minimum of pounds 3,000 per trade.

Although many top French stocks are also quoted on Seaq, the London Stock Exchange's dealing system, it is often possible to get a better price dealing in the local market, offsetting the lower commission.

However, the forthcoming sale of the century, in which the French government plans to privatise 21 companies to raise up to pounds 40bn, has a number of things to offer smaller investors.

In particular, because the stock is being sold by the French government, there will be no need to pay a French broker - indeed, if you are brave enough you need not use a broker at all.

There is every probability when the first (as yet unnamed) company is privatised in September that the French, who have studied the British experience carefully, will conclude that a first-day premium is necessary if the overall privatisation programme is to be a success.

On the assumption that many British investors will be unwilling to handle all the formalities themselves, Killik has developed a French privatisation package that enables them to stag French issues.

Investors place a minimum of pounds 5,000 on deposit with Killik. The money is converted into francs immediately and earns interest at 5 per cent.

When the initial privatisation is launched Killik - probably on a group basis - applies for shares on behalf of its investors and then immediately sells such shares as it receives when they are allocated or on the first day's trading.

The cost is around 1.75 per cent of stock allocated with a minimum of pounds 25, though Killik will offset any related commissions paid by the French government.

So far, the plan has attracted more than pounds 2m and 300 investors, which Paul Killik said was an extraordinary level of interest.

Killik has already converted some of the cash into francs, which has brought a loss, but the remaining cash is being held in sterling until the present uncertainty is resolved.

Details: Killik & Co 071 589 1577

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