View from City Road: You can beat the French system

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The Independent Online
With the French embarking in September on one of Europe's biggest privatisations to date this ought to have been the moment to celebrate the arrival of the borderless investment community.

The state is anxious to ensure the success of its initial offering since it marks only the first pounds 11bn tranche of what it hopes will be an international money-raising exercise worth pounds 40bn in total and involving 21 companies.

Hence the choice of three plum holdings - the banking giant BNP, the chemical group Rhone-Poulenc and the oil company Elf - plus the retail bank Banque Hervet, and the strong likelihood the pricing will be attractive.

Yet no matter how generous the sell-off, it is unlikely to do much to convince the UK public of the pleasures of cross-border shareholdings.

It is a question of dealing costs. Individuals who want to buy shares quoted on the Paris Bourse almost inevitably have to use two sets of brokers - one in the UK and one in France - and pay two sets of commission. Typical charges to an individual for a one-off trade might be 2 per cent for the British broker, plus upwards of another 1 per cent for the French, with a minimum charge of pounds 70- pounds 80. As the French do not issue share certificates to individuals, there would also be an annual fee of around pounds 30 for share depositary. And in some circumstances there may be a charge of pounds 10- pounds 15 for buying the francs.

It all looks pricey against the 1.6 per cent an individual would probably pay to invest in London-quoted shares. Indeed high dealing costs are one reason for using investment trusts for cross-border investment - and they also give a spread of risk.

But there is one bright point for small investors in all of this. Buy French privatisation stocks and you are (or rather your British broker is) buying direct from the government. No French broker should be involved, saving one set of costs. For once you can beat the system.