Thread,
On foreign investing-
I have most of my money in HK/China equities. I have looked at other foreign markets and determined this to be the lowest risk with the largest potential.
The one factor that caused me to avoid equities in other countries was the necessity of not only determining the value and potential of the company, but to research other items that might effect the investment. I singled out HK/China because the currencies are pegged to the $US, favorable tax incentives, and some other factors.
Suppose one now finds an under valued company in Japan. If bought with the yen at 115, the performance of the company is less critical than the prospects of the yen going to 140 or higher. A 20% company growth could be eliminated by a 20% currency devaluation. By the same token, a stronger yen would increase the value of the holding. By making an investment, one must determine not only that the company will be successful, but that the yen will not decline and that Japan's high corporate tax rate or other political/social factors won't be detrimental to the investment.
An example of the problems one faces: ELAMF (Mexico) had long stated that a devaluation of the peso would lower their costs and make them more competitive. The peso dropped from 7.80/$US to over 10.00. It lowered ELAMF's costs but it also caused a huge tax from currency gains on $US they held in the bank. This resulted in a major reduction in earnings.
An extreme example - A little over a year ago the Russian market was selling at a huge discount to value. Today those companies are at much higher value in roubles, but are almost worthless in $US.
A recent report indicates that Asian markets would have been the place to invest a year ago. In local currency they have shown minimal improvement, but in $US, the gains were substantial. Had one invested in Japan a year ago, they would have seen minor improvement in the yen value of the stock, but would have had substantial $US gains in value because the yen improved from 140 to 115. Japanese investors that fled to the US markets have suffered losses for this same reason.
IMO there are some excellent opportunities for investment in foreign equities but it requires extensive research on risk determination well beyond the amount required for investing in the US.
JMHO,
Ron |
