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Overseas Stocks Look Good

- Alan Lavine and Gail Liberman

Money managers like the overseas markets better than the U.S. markets. The reasons:

The dollar is weak. That results in increased values in stocks purchased in foreign currencies. Many economies are growing faster then those in the United States. Plus several foreign stocks represent better values than their U.S. cousins.

Last year, international stock funds gained 35 percent. About half the return is due to the weakness in the value of foreign currencies. As long as the United States runs a big budget deficit and interest rates remain low, the dollar will be weak.

"We believe weakness in the dollar will persist until such time as the United States begins raising interest rates," says Sheldon Jacobs, publisher of The No-Load Fund Investor, Ardsley, N.Y. "But even if currencies fluctuate in a narrow range, overseas markets offer considerable potential. Overseas valuations are still favorable. Most foreign economies and corporate earnings are growing."

A survey of economic forecasts by The Economist, an international business magazine, shows that the global economy is picking up steam. The U.S. economy is expected to grow at 4.5 percent in 2004. By contrast Asian countries like China are expected to grow at 8.5 percent. Economies of South Korea, Thailand, Hong Kong and Taiwan are growing faster than the economy in the United States. Argentina, Venezuela, Turkey Poland and Russia also are growing faster.

There is no free lunch, however, when you invest overseas. Stocks are thinly traded in the emerging markets. A big sell-off in stock markets like Brazil or Russia could send stocks tumbling. There also is the threat of terrorism. In Asia, the problems with North Korea, unstable governments and banking systems could cause problems for investors. Plus, a rising dollar would hurt foreign stock prices.

That said, Jacobs recommends the following international stock funds: Longleaf International, Vanguard Emerging Market Index Fund, Tweedy Brown Global Value, Artisan Fund and T. Rowe Price International.


Alan Lavine and Gail Liberman are husband and wife columnist and authors of The Complete Idiot's Guide To Making Money With Mutual Funds, (Alpha Books). Al and Gail's new book is Rags to Retirement, (Alpha Books).

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