Going Global

It may not look like the best time to invest overseas. Think again.

Morningstar labels foreign funds. These funds invest their assets exclusively overseas. Then, there are global or world stock funds, which allow portfolio managers the liberty of investing in the U.S. and abroad. That way, if you’re a little unsure of developments abroad, you’re assured that some of your assets remain close to home.
Thanks to American depository receipts or shares (ADRs or ADSs), you can also put your money in individual companies even if their base and stock market happen to be thousands of miles away. That’s because ADRs and ADSs act as vouchers representing blocks of stock an intermediary holds in a foreign stock market for you. Sounds a bit complicated? It isn’t. For one, you can buy and sell ADRs or ADSs through a broker or online brokerage as you would any American stock. As an added convenience, ADRs and ADSs have stock prices listed in the daily papers along with other equities on the New York Stock Exchange or Nasdaq.

So, now that you have all the pieces in place, you might want to know where to look for the best overseas opportunities in 1999. Well, this year, all investment roads outside the U.S. seem to lead to Europe. This year, stock markets in the Old World have been sizzling. For one, the euro, a currency linking 11 of Europe’s markets, will open markets to many of Europe’s well-established names. There’s another plus. Many nations, such as Italy, Portugal and Spain, have had to cut budget deficits and lower interest rates in order to meet the standards set by members of the European Economic Monetary Union that has overseen the euro’s introduction. The result is a boom in many of Europe’s smaller stock markets.

Elsewhere? Experts say the rest of the world has some sorting out to do this year. Between depressed commodity prices and strife in the Congo, Africa hasn’t exactly been an investor’s bonanza, says Kunal Kapoor, fund analyst with Morningstar. “You’d have to be pretty daring to want to put a lot of money there,” he adds.

Meanwhile, Brazil’s currency woes seem to have Lati
n America in their grip and could drag the region down this coming year. “We’re pretty pessimistic about Brazil’s currency devaluation and its effect on its neighbors,” says Marcus Smith, an analyst in the London office of MFS Investment Management, a mutual fund company.

Parts of Asia, at long last, seem to be bottoming out, although the region as a whole is still something of a wild card. That’s to say that while Korea’s debt has recently been upgraded to investment grade, Japan continues to be mired in a decade-long recession, says Kapoor. Others see China on the brink of some problems, and that doesn’t bode well for the region bouncing back.

The prognosis? We’d say stick to funds to handle anything out of Europe. If you’re bent on owning individual stocks, though, Europe looks like the best bet, with some very solid companies that more than hold their own on the international

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