Small investor can invest in shares of foreign companies

Now it’s working. As of this Thursday (the 22nd) small Brazilian investors can already buy and sell papers that represent shares of foreign companies, such as Google, Amazon and Apple, the so-called BDRs (Brazilian Depositary Receipts).

The Securities and Exchange Commission (CVM), the body that regulates the capital market in Brazil, gave the go-ahead for the stock exchange regulation that expanded this market to more people. With the new rules that are beginning to apply today on the Stock Exchange, BDRs that previously could only be purchased by Brazilians with more than R $ 1 million to invest, the so-called qualified investors, are now free for retailers, that is, for any investor.

This year, until 9/16, the BDRX (BDRs index) appreciated 40%, while the Ibovespa (the main stock index) fell 14%. Savings gained 1.8% (see chart below).

According to B3’s Client Relationship Director, Felipe Paiva, the investor now has 670 BDRs from large companies at his disposal. See the list here.

More business

According to a survey by the financial analysis company Economatica, the average volume of trading with BDRs in 2020 it is R $ 59.8 million per day, an increase of 267% in relation to the daily average of 2019, which was R $ 16.3 million.

BDRs are securities traded on the Brazilian stock exchange that represent shares of foreign companies. It is not the actions directly, but representations of them. They are traded by companies or financial institutions. To be currently traded on the stock exchange, they must be backed by company shares.

Thus, an Amazon BDR, for example, is guaranteed by Amazon shares, which are kept as ballast.

“When it comes to diversifying stock investments, Brazilians are excluded from various sectors, such as technology, for example, which is doing very well during the economic crisis, because our stock exchange has few companies in this area,” explained the investment specialist of the independent analytical house Spiti, Francine Balbina.

In search of ways to reduce costs to attract business to the BDR, the BDR Stock Exchange trading rules reduce the minimum trading lot. Instead of 10 BDRs as it used to be, the standard batch became just one BDR for each operation.

How to invest

To invest in BDRs: Brazilians can buy shares on the stock market directly, as shares, or through investment funds.

• Purchasing directly: just open a brokerage account and give buy and sell orders, as you do when investing in shares of Brazilian companies.
• Applying in Funds: There are brokers launching funds that invest mainly in BDRs. It works as a variable income investment fund, with minimum application rules, redemptions, with management fees charged.

Costs

• Purchasing directly: investor pays brokerage fee, which varies from broker to broker, but is between zero to 2% of the amount traded, depending on the firm. In addition, there are fees charged by Bolsa B3, in the order of 0.03%, and, still, custody fee charged by brokers, but which has been exempted in many financial institutions.
• Buying shares of investment funds: managers charge two fees: the administration fee, usually around 2% of the amount applied; and performance, on the gain obtained by the fund in relation to some benchmark, such as Ibovespa. It is usually 20% of the income above the benchmark.

Taxes

• Purchasing BDRs directly: the investor will have the tax cost, between 15% and 22% of capital gain tax, which occurs when the investor sells a share at a higher price than he bought. It also has 15% on the exchange rate variation and 27.5% on the receipt of dividends (since they are foreign companies).
• In BDR funds: the rate of IR is 15% which is levied on income and that the investor only pays on redemption.

Tips

Market professionals heard by the Twitter point out that investment in BDR is like investment in normal shares, that is, there is a company behind, of which the investor becomes a partner. Therefore, it is important to understand the fundamentals and the future prospects of the company.

In the long run, the movement of the stock is nothing more than a reflection of the company’s profits.
Female Purple, chief strategist at Rico Investimentos

Another important point, highlights Betina, is that BDRs represent investments of variable income. That is, they fluctuate, with periods of high and others of low.