Staying On Top Of The World

Two B.E. international fund picks are off to the races in '98

Recently, the benefits of global investing have been a tough sell to anyone stateside. On the one hand, the S&P 500 seems locked in a relentless climb upward. On the other, Europe and Asia, due to one problem or another, just couldn’t keep up with U.S. stocks.

Raise the curtain on 1998, and a different picture is shaping up. Yes, Asia is still hamstrung by economic problems in several of its emerging markets. But Europe is on an upward trajectory. Wayne Weddington, head of the international investment firm Pennoyer Capital Management, sees a year ahead when stock markets in Switzerland and the Netherlands could well outdo the U.S. market by 20% or more.

We talked to Weddington a year ago and had him choose a few countries that looked good. He chose the United Kingdom and the Netherlands, along with Japan and Malaysia. Weddington says Japan was due for a turnaround, but shortly after our article appeared, economic indicators reversed on his prognosis and he actively “shorted” the Japanese market. If you’ve been following the currency crises of several Southeast Asian countries, you know that Malaysia, once a tiger, is now reeling. Many analysts, in fact, think Southeast Asia has yet to hit bottom.

Weddington is bullish on several European markets, however, and says they will outperform the U.S. market in 1998. He feels Switzerland, Belgium, the Netherlands and Ireland are looking good. And that bodes well for two of the mutual funds we picked using Weddington’s macroeconomic forecasts. The Wright EquiFundNetherlands (800-888-9471) returned 15.44% last year, and year-to-date it seems to bear out Weddington’s predictions, with a knockout 24.08% return. Alliance New Europe A (800-227-4618), which spreads its assets over a broader base, has done even better. After a 16.83% total return last year, the fund is up 30.76% as of press time.

Our Asian picks, unfortunately, have reeled along with the continent’s stock exchanges. The Merrill Lynch Pacific A Fund (800-637-3863) fell 6.32% last year, and so far in 1998 is down 2.65%. The Vanguard International Equity Index for Emerging Markets (800-662-7447) slipped 16.74% in 1997, and is down 10.71% this year.
Our advice: stay in Asia only if you’ve got nerves of steel. An investment in Europe, especially via a broad-based fund, looks like a good bet.

Fund

1997 Total Return

Year-to-Date Total Return*

1997 Outcome on $1,000 Invested

Wright EquiFund-Netherlands

15.44%

24.08%

$1.154.40

Alliance New Europe A

16.83

30.76

1,283.90

Merrill Lynch Pacific A

-6.32

-2.65

936.80

Vanguard International Equity Index for Emerging Markets

-16.74

-10.71

832.60

Source: Morningstar (www.morningstar.com); as of 6/1/98
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