Going Global

Going Global

July 8, 2005

I joined Dylan Ratigan on CNBC’s Market Hour on July 4 to talk about the best places internationally to place money in the next half of the year. First, I like the U.S. markets; I think they are in very good shape and have a very good core foundation.

But on top of that, I like to add international exposure. Not in Europe–Europe is not growing and not going to grow. But Asia is a great bet. A risky bet but very high return one for sometime to come. I like both South Asia for the commodities that feed China and North Asia as a manufacturer and producer of products. I think ETFs (exchange traded funds) are a good way of adding international bets to your portfolio. What I like about all these ETFs is that they have 50 to 100 stocks in each one. Although watch out, they have quite a heavy concentration in the banks which is the core of the market in most of these countries. Some examples:

There is an ETF (ticker, EWJ) which is a way to bet on Japan. Japan is having a turnaround that is partly driven by exports of capital goods into China and partly driven by changes over the last few years in their own monetary policy. But as an investment, that’s not a homerun. That’s a single.

You can buy South Asia with an ETF (ticker EPP) that is an index of the Australia, New Zealand, Singapore and Hong Kong markets. Think of that as the coal going from Australia up into China, feeding the industrial boom there and the capital markets of Singapore, and Hong Kong that are supplying China with the funds to grow their businesses. There are also exchange traded funds for Taiwan (ticker EWT) which is the home of the semiconductor business–but that is riskier because of the political issues with mainland China. The government of Malaysia just announced that they are bringing broadband through the power lines to every home in Malaysia starting this summer, so I expect some growth from that. The ticker for Malaysia is EWM.

India has had phenomenal growth, but most American investors have difficult time investing in India. One way is by investing indirectly through U.S. companies doing direct investments in India. Most technology and professional service companies are now using it as an outsourcing base. China is growing 9% a year, but India is growing 8% and will for sometime. India will pass China in size of their economy in the next 20 to 30 years. And inside India, they’re doing things to make this growth sustainable. What have they been doing? They made a law that foreigners can own land. Foreigners can own bank. They have increased the share of telecom companies that foreign investors can own from 49 up to 74%. India has also lowered corporate taxes and made big infrastructure investments in telecom, fiber-optics and wi-fi. They’re hard wired up to us with fiber-optics. They will grow like crazy.

JR

John Rutledge

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