Here’s how Aussies can buy UK stocks. Picture Getty
Here’s how Aussies can get their hands on UK stocks before the markets rebound
Experts
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- Experts believe the UK market faces uncertain prospects in 2023 but opportunities abound
- Here’s how to trade UK stocks from Australia
- Tax implications for trading UK stocks
When people talk about investing in UK shares, they usually mean investing in the blue chip companies that make up the FTSE 100 index.
Over the past year, the FTSE 100 index gained 2% despite the rout in global markets and the UK having to grapple with soaring inflation and political turmoil, including having three different Prime Ministers.
European markets meanwhile had a much tougher year, with the Euro Stoxx 600 index and German Dax losing 12% each.
The UK market has been mainly propped up by sharp rises in its energy and mining stocks, basically those that benefitted from Russia’s invasion of the Ukraine.
The bourse’s two biggest companies BP Plc (LSE:BP) and Shell Plc(LSE:SHEL) gained more than 40% in 2022, while the world’s biggest commodity trading company Glencore (LSE:GLEN) surged 50% over the same period.
Other popular stocks in the FTSE 100 index include drugmaker AstraZeneca (LSE:AZN), which was up 40% in one year.
Unilever (LSE:ULVR), HSBC (LSE:HSBA), and Australian giant Rio Tinto (LSE:RIO) are also traded on the London stock exchange.
The more UK-focused FTSE 250 index, which includes medium-sized companies, had a rougher year, falling by 20% in 2022.
Companies in this index are less well-known, and include names such as Volution (LSE:FAN), CMC Markets (LSE:CMCX), and Currys (LSE:CURY).
UK outlook for 2023
In its 2023 macro outlook, Goldman Sachs has forecast that UK’s economic contraction will be almost as deep as that of Russia.
Goldman predicts the UK economy will decline by 1.2% this year, well below all other G-10 (Group of Ten) major economies.
Consultancy firm KPMG also projected a 1.3% contraction in the UK GDP.
Russel Investments wrote in its investor report, 2023 Global Market Outlook:
“The UK seems set for a prolonged recession, as monetary tightening, fiscal tightening, the energy price shock, and supply-side constraints from Brexit combine to create a challenging outlook,” the report said.
“Markets expect the Bank of England (BOE) to lift the base rate from 3% currently to 4.5% by the second quarter of 2023, as wage pressures prevent inflation from falling quickly.
“The BOE’s inflation vigilance makes it difficult to forecast a UK recovery in 2023.”
AJ Bell investment director Russ Mould however is more optimistic about the FTSE prospects.
Mould said that corporate confidence in the UK is high, judging by how the FTSE 100’s members have announced a record £55.2 billion in share buybacks in 2022.
He believes UK stocks are cheap right now, and buying cheap is the best possible way of getting good long-term returns.
“As the old saying goes, ‘you can have good news and cheap stocks, just not both at the same time’,” Mould said.
“That said, there are more than enough variables to make second-guessing the markets even harder than usual.”
How do I buy UK stocks from Australia?
The UK stock market is liquid and can be easily accessed by Aussie investors.
Most of the major brokers offer access to European stock markets, including that of the UK market.
Markets that can be traded by Australian investors include:
* London Stock Exchange (LSE)
* EURONEXT Paris (PAR)
* EURONEXT Brussels (BRU)
* EURONEXT Amsterdam (AMS)
* SIX Swiss Exchange
* Frankfurt Stock Exchange (FWB)
* Bolsa de Madrid (Spain)
* Nasdaq Stockholm (Sweden)
* Nasdaq Copenhagen (Denmark)
Now read: Opportunities abound in the EU market. How do I get my hands on European stocks?
Commsec, Nabtrade, Westpac and ANZ offer trading access to most of these exchanges. So do major brokers like Interactive Brokers, IG, CMC Markets, and eToro.
These brokerages mostly charge tiered commission fees – for example Interactive charges 0.05% on UK stocks if the monthly trading value is less than GBP 40m, and 0.015% if it’s above GBP 400m.
When choosing a broker, you should also consider factors other than fees.
Ease of use, the ability to access other global markets, the quality of research provided, and the availability of customer support are also important considerations.
Some platforms also provide education resources, but these might be charged at an additional cost.
Buying UK stocks through ASX-listed ETFs
Betashares offers an exchange traded fund (ETF) that invests in the FTSE 100 index, called the Betashares FTSE 100 ETF (ASX:F100).
The fund replicates the FTSE index, and its top 10 holdings as of January 6th include:
The fund charges management fees of 0.45% p.a, and over the last 3 months, it has returned 11%.
Tax implications for Aussies
Australian tax residents are subject to tax on worldwide income.
This includes investment income (dividends) and capital gains from overseas investments.
In order to prevent double taxation, Australia has entered into “tax treaties” with more than 40 jurisdictions, including the UK.
International investments are complex, so you should consult with your accountant or read more about it on the ATO website.
Stockhead has not provided, endorsed or otherwise assumed responsibility for any advice on financial product contained in this article.
