Annual Mutual Fund Review & Outlook : Red-Hot Foreign Markets Remain Popular : Funds: While everyone is worried, many experts say it would be foolish to bet that the run is over, after just one year.
High, but going higher--though maybe not right away.
That’s the way many global fund managers view red-hot foreign stock markets’ prospects for ’94.
The wave of American cash that poured into foreign stock funds last year helped make foreign stock gains a self-fulfilling prophecy.
The average international stock fund posted a total return of 39.4% in 1993. And even the poorest-performing fund was up 20.8%.
While last year’s huge overseas returns have everyone worried, many experts say it would be foolish to bet that the foreign markets’ run is over, after just one year.
The positive stories of ’93 remain positive for ‘94, analysts note: China’s boom, Latin America’s economic resurgence, and the eventuality of a European recovery.
And then there’s the simple issue of cash flow: After years of ignoring foreign markets, Americans have decided to think globally. That isn’t likely to change, says Michael Stolper, a San Diego money manager and pension fund consultant.
“I think this is going to be the game to play for several years,” Stolper says. “Even if the U.S. market cracks, money is still going to go into non-U.S. markets,” he said--because U.S. investors know that many foreign economies are certain to grow much faster than the U.S. economy in the ‘90s.
But have foreign share prices gotten ridiculously expensive? Richard Hazelwood, manager of the Fidelity Emerging Markets Fund in Boston, advises U.S. investors to remember that the world is less a stock market than a market of stocks. Bargains and interesting growth opportunities may be less prevalent than a year ago, but they’re still there, he argues--for investors with a long time horizon.
One of his favorite themes is what he calls the “spread of middle-class Western values”: The desire to have a home, car and gadgets. “With that spread comes a lot of growth stocks,” he says--from utilities in Hong Kong to cellular phone firms in Malaysia to cement mixers in Mexico.
Likewise, Bryan Sudweeks, co-manager of the Montgomery Emerging Markets Fund in San Francisco, says critics fretting about the surge in Third World investing are forgetting that these are much bigger markets than even five years ago. In theory, that should make them more liquid and at least slightly less speculative.
Nonetheless, Sudweeks concedes, “If you’re taking less than a two- or three-year view . . . this is not the place to be.”
The Best, Worst of Last Year
Here are the 10 best-performing and 10 worst-performing general international stock funds of 1993:
TOP FUNDS
Funds & ’93 gain Morgan Stanley: Emerg. Mkts.: +85.7% Fidelity Emerging Mkts.: +80.7 GAM International: +79.4 Govett Emerging Mkts.: +78.9 Templeton Develop. Mkts.: +74.2 Merrill Develop. Cap. Mkts.: +68.0 GT Global Emerg. Mkts. A: +64.5 Lexington Worldwide Emerg.: +62.8 Montgomery Emerg. Mkts.: +58.1 Govett Intl. Equity: +53.8
WORST FUNDS
Fund & ’93 gain Goldman Sachs Intl.: +20.8% Vista Intl. Equity: +21.3 Merrill Consults Intl.: +22.1 SEI Intl.: +22.8 Boston Co. Inv. Intl.: +24.7 Pierpont Intl. Eq.: +25.0 Nations Intl. Eq. Inv. B: +25.5 DFA: Large Cap. Intl.: +26.0 Alliance Intl. B: +26.3 Nations Intl. Eq. Inv. A: +26.6
Source: Lipper Analytical Services
