You’ve decided to gain some exposure in the South Korean market. However, how do you go about buying stocks in the Korea Exchange (KRX) from Singapore?
Here’s a guide to get you started:
Table of Contents
How to buy Korean stocks in Singapore
Here are 3 ways you can buy Korean stocks in Singapore:
- Brokers that trade in the KRX
- Buy Korean GDRs listed on the LSE
- Buy Korean ETFs listed on the NYSE
Brokers that trade in the KRX
You can choose to purchase Korean stocks direct from the Korean Stock Exchange (KRX).
In Singapore, only 4 brokers give you access to the KRX:
Other brokers like Tiger Brokers do not have this access.
Moreover, some of them only allow you to trade via a trading representative. This means that you can’t trade on their online platforms.
Instead, you’ll need to place an order with your designated trading representative!
|Online Platform||Trading Representative|
|Lim & Tan||OCBC Securities|
Maybank Kim Eng
Lim & Tan Securities is the only platform that allows you to trade online. All the other 3 require you to make a trade via your trading representative.
Trading in the KRX
Here are some things you’ll need to take note when you want to trade in the KRX:
Commissions charged by broker
Here are the commissions that you’ll need to pay the broker for each trade you make:
|OCBC Securities||0.80%||KRW 55,000 / USD 50|
|Maybank Kim Eng||0.75%||KRW 40,000|
|Lim & Tan||1%||S$90 (with remittance |
charge of 30,000 KRW)
Some of the brokers may charge GST on their commission as well! As such, it can be really costly to trade Korean stocks.
It seems like purchasing Korean stocks via POEMS is the cheapest option!
Custodian charges may be charged by brokers
When you trade with these brokers in foreign stocks, you may need to pay a custodian charge.
All of these brokers have the same charge of $2 per counter per month (max of $150).
However, the custodian charge can be waived if you make a certain number of trades, either:
- 2 trades in the same calendar month
- 6 trades in the same calendar quarter
This may be equivalent to an inactivity fee charged by these brokers.
POEMS charges a different custody fee. They will charge 0.01% on your portfolio’s month end value.
This custody fee cannot be waived!
Since you are a foreigner trading in the KRX, you are subject to a foreign fee.
This is only applicable when you make a sell order.
Here are the foreign fees you’ll incur, depending on the number of units that you purchase:
|Type of Lot||Fee Charged|
The board lot for the KRX depends on the price of the stock. This is different from the SGX where the minimum lot size for a stock is 100.
The trading hours for the KRX are between 0800-1430 (Singapore time).
The exchange is only open on the weekdays, from Monday to Friday.
Tax implications of investing in Korean stocks from Singapore
Since you are a Singaporean investor, you are subject to a dividend withholding tax. This will be incurred if the Korean stock issues a dividend to you.
You will be subject to a 15% dividend withholding tax on any Korean stocks that you buy.
A lower tax of 10% will be incurred only if you have an equity ownership of ≥ 25%.
If you are looking to buy any dividend stocks from Korea, you may want to reconsider due to the costs. A 15% withholding tax can really eat into your returns!
Buy Korean GDRs listed on the LSE
If you find purchasing Korean stocks on the KRX to be too expensive, you can consider purchasing a Global Depositary Receipt (GDR).
A global depositary receipt (GDR) is a bank certificate issued in more than one country for shares in a foreign company.Investopedia
This is very similar to American Depositary Receipts (ADRs) that are issued by a US depositary bank.
You can purchase the Korean GDRs on the London Stock Exchange (LSE).
So far, I have only found 2 Korean GDRs that are available:
Interestingly, Samsung’s GDR is a common share, while LG’s GDR is a preferred share.
You will need to find a broker that allows you to trade GDRs on the LSE to purchase these Korean GDRs!
Buy Korean ETFs listed on the NYSE
If you do not want to pick a specific Korean stock to invest in, why not buy the Korean market as a whole instead?
There are 2 ETFs listed on the NYSE that track an index of Korean stocks:
However, both of them track different indexes:
|Index Tracked||MSCI Korea 25/50 Index||FTSE South Korea Capped Index|
These indexes are similar to the S&P 500, which represents the top 500 companies in the USA.
Even though they track different indexes, their top 4 holdings are the same:
|Stock Name||Stock Ticker|
|SK Hynix Inc||000660|
|LG Chem Ltd||051910|
Both ETFs have a very high weightage towards the Samsung stock. However, EWY has a slightly higher weightage towards Samsung compared to FLKR!
When you buy either ETF, you will gain exposure to the Korean market as a whole.
Tax implications of buying a US-listed ETF that contains Korean stocks
There are extra tax considerations you’ll need to take note of if you want to invest in either of these ETFs from Singapore.
This is because both ETFs are domiciled in the US.
#1 Extra dividend withholding tax
For any ETF, the fund manager buys the stocks based on the index they are tracking.
The dividends that they distribute are collected from the stocks in their fund.
As such, there are 2 layers where you may incur some taxes:
- From stock to ETF
- From ETF to you, the investor
Korea also has a dividend withholding tax of 15% when it distributes its dividends to the US-listed ETF.
However, you will incur a dividend withholding tax on the second layer as well!
When the US-listed ETFs issues the dividend to you, you will be subject to the second layer of tax of 30%.
As such, you will incur a dividend tax on both layers.
In the end, you will only receive 59.5% of the original dividend that’s issued to you!
#2 US estate tax
On top of the dividend withholding tax, you will be subject to the US estate tax as well. This can range from 18-26%, depending on the amount of US assets that you have!
This tax will only come into play when you pass on. The estate tax will be taxed on your total assets, regardless of whether you intend to pass it on to someone or not.
If you wish to leave your assets for your loved ones, you may not want to invest in US-listed ETFs!
The ways that you can invest in Korean stocks is rather limited for a Singaporean investor. This is because:
- Not many Singaporean brokers offer trading in the KRX
- GDRs have to be bought on the LSE
- US-listed Korea ETFs are quite tax inefficient
As such, you’ll really need to consider if investing in these Korean stocks are worth the hassle!