How foreigners and Ukrainians can invest in Ukrainian stocks, if they dare take the risk
Helpful advice from Dragon Capital.
Dragon Capital, a leading investment bank based in Kyiv, said investment options for Ukrainians are limited. They can not invest abroad without special permission from the National Bank of Ukraine.
Dragon’s managing director Dmytro Tarabakin said that stock market players are currently in talks with Ukrainian authorities to allow Ukrainians to expand their options by investing in Ukrainian businesses listed abroad, such as MHP, Kernel and Ferrexpo.
Individuals can trade stocks, bonds, derivatives and investment certificates in Ukraine. Trading is done on stock exchanges, with the Ukrainian Exchange being the largest and most technologically advanced at present.
Regardless of which investment instrument is chosen, the client must sign an agreement with a professional licensed company (a broker or an asset management company).
Dragon Capital provides a complete spectrum of investment services to individuals, accounting for the largest share of stock market transactions by private investors in Ukraine.
There are four principal ways in which individuals can invest in stocks and bonds in Ukraine:
- Online trading (trading directly from your computer using QUIK trading software);
- Broker-assisted trading (submitting buy and sell orders to the broker and signing a trade agreement);
- Mutual funds (investing jointly with a pool of other individuals in a fund which follows a pre-defined investment strategy and is managed by a professional asset manager); and
- Trust management (specially licensed service under which a portfolio manager creates and manages an individual investment portfolio for the client, usually wealthy individuals, after agreeing on an investment strategy, horizon, risk tolerance, expected return).
In general terms, a person needs to provide the following to become a client:
- passport; tax identification code; account details in any Ukrainian bank; for non-citizens of Ukraine: a confirmation of the person’s residence in Ukraine; for non-citizens of Ukraine: tax residency certificate.
Non-resident clients who are not Ukrainian citizens can use broker-assisted trading to invest in Ukrainian stocks. For this they should provide their passport and details of their investment account in any Ukrainian bank.
Non-residents can also invest in shares of Ukrainian companies listed abroad through offshore accounts opened with international brokers.
To start the investment process an individual opens a brokerage account with a local broker, signs a brokerage agreement (which may also include an agreement for on-line trading) and transfers money to this account from his bank account.
The bank account can be opened on the same day in any bank, although costs are lower when the account is in the same bank as the brokerage account. For online trading, these funds are transferred to the exchange and are made available for trading.
For broker-assisted trading, funds remain in the brokerage account until due payment arrives. The client then places buy and sell orders either directly through the terminal or via their broker’s personal investment manager.
In order to withdraw the funds, the client follows a reverse procedure. After all holdings are liquidated at the client’s request, the money is transferred from the person’s brokerage account to their bank account.