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Hello: I'm a Canadian who has just returned to Canada after a 10 year residence in USA and so I mostly have USD until I start work here in another 3 months.

I wish to purchase BCE & other Canadian stock, but as my CDN funds are limited, would it make more sense to buy the stock in US funds given that it also trades in the NYSE rather than exchange to Canadian at a time when the CDN dollar is so high? I suppose that as long as companies are Canadian, the withholding tax would not apply to me. Any advice? Thanks in advance.
 

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hello, and welcome back to canada.

i'm interested in, and sometimes practice, simple forms of arbitrage between US & canadian markets.

BCE would be a good example of an interlisted stock that could be bought in either market depending upon detailed particular circumstances of each investor. There is decent volume in NY nearly all of the time, so a buyer in USD would not be crippled by illiquidity.

not all interlisted stocks present same profile. Some like POT and RIM have forsaken country of origin & now trade principally in the US. Others have much less US liquidity; canadian bank stocks are examples. And some like Telus even have a slightly different class of common as a US listing.

one thing that could be useful if you purchase BCE in USD on NY - be sure to move stock promptly to your canadian account, which would be at same brokerage. Transfer can be accomplished, usually without charge, by simple journal. The reason is that you want your dividends paid in CAD, which is their currency of origin. If you were to keep stock in US account, the broker & its bank & transfer agent will charge you hidden fees to convert your dividends to USD.

btw whether you receive dividends in CAD or USD, the appropriate canadian dividend tax credit will be granted to you, and there will be no withholding tax, provided that you have given your broker a canadian SIN and a legitimate canadian residential address.

another thing that could be useful is that, if you were to sell your BCE out of your canadian account some day, you would receive canadian dollars without EVER paying any currency exchange fee.

others will probably warn you of currency risks. If USD falls further your purchase will look brilliant in CAD. If USD rises, not so brilliant. As it happens, for a number of reasons i do not hedge.
 

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Discussion Starter #3
Thank you humble pie, good to be back!

Thanks for the advice also & happy investing in 2010.:)
 

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Just to further Humble Pie's remark, there should be no currency risk/difference no matter which version of BCE you buy (TSE or NYSE). Once you use your US dollars to buy a share of BCE, you have a share of BCE, not US (or CAD) dollars. If you already have US dollars, then buying it on a US exchange and transferring it over can be a good way to save on currency conversion fees, but you won't address your issue of converting your US dollars while the CAD is high.

Since BCE is (basically) valued in Canadian dollars, if the CAD drops relative to the USD, then BCE trading on the NYSE should also drop a corresponding amount (arbs like Humble Pie will take care of that). And of course, if you transfer your shares to CAD at your brokerage, then you've effectively made the conversion there.
 

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you're right, potato, but we are looking at the same structure from different perspectives.

absolutely true that once BCE is acquired the currency exposure is crystallized and risk no longer exists. But what i was referring to is the situation prior to purchase that the poster mentioned. She said she has a certain inventory of US dollars but few canadian dollars.

what i meant was that if USD drops 10% from today, it would take more USD to buy a BCE share and thus a future purchase would deplete her inventory more, so any purchase today would end up looking brilliant. On the other hand, if USD rises 10% from today, it would take less USD to buy a BCE share, so any purchase today would not look so brilliant. In both scenarios i've assumed that BCE sh price remains steady & unchanged in CAD (it's a simplistic example.)
 

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I second Potato's post.

Humble's post confuses two issues together (the BCE purchase, and your 'home' currency'). Better to ask the question:"Am I in Canada to stay? Do I look at the value of my wealth in Loonies or US dollars? Do I face FX risk by holding US dollars or Loonies?"

If the answer is Yes, then you should consider converting your currency to Loonies now (except for what you want to keep for investing in foreign stocks for which you can decide to hedge). NOT converting now is the same as making a bet on future rate changes. That is a game I never play. The rates change on a whim and sentiment. The Euro recently lost 5% in about a week!
 
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