Stock market analysts may believe our longest-running bull market will soon present less growth opportunities in the U.S., but several experts say that means it’s time to take advantage of myriad opportunities abroad.
“The best opportunity right now is outside the U.S. market,” says Alexander Lowry, a finance professor at Gordon College. “The U.S. is at least at fair value, more likely overvalued.”
Besides, many investors have “something of a home-country bias and could stand to have more international exposure in general,” says Kirsty Peev, certified financial planner and portfolio manager of Halpern Financial, a wealth management firm in the District of Columbia.
[See: 7 Ways to Invest in Emerging Markets.]
The key to making the most of an investment abroad is looking not just at current economic and political conditions, but also demographics that help forecast how aggressively your investment can or will grow. The following are five countries to watch.
Strong growth in Israel. “Israel stocks are incredibly resilient. Currently, they are outperforming developed markets while geopolitical risks in the region, such as in Turkey, are still high,” says Steven Schoenfeld, founder of BlueStar Indexes, a New York research firm focused on Israeli capital markets.
Standard & Poor’s also recently upgraded Israel’s credit outlook to AA-.
“Besides cutting debt and responsible budget management by recent governments, the other main reason for the credit rating upgrade was the notable performance of the Israeli economy in recent years,” Schoenfeld says. “Israel’s 3.5 percent growth rate over the past decade is 20 percent higher than that of the other countries in Israel’s old credit rating group.”
The country’s flourishing high-tech sector and natural gas discoveries are expected to ensure energy independence and increase state tax revenues in the coming years, he says.
‘It’s a fantastic time to be in China.’ Perhaps unsurprisingly, China is expected to be a strong international performer for the near- and long-term future.
“Now probably isn’t the best time for all emerging market investments, except that it’s a fantastic time to be in China,” Lowry says. “China is on the verge of massive technological changes. Investors in the best companies there will make an enormous profit.”
[See: 7 of the Best Emerging Markets Stocks to Buy.]
Lowry cites companies such as Tencent Holdings, Alibaba Group Holdings (ticker: BABA), Ctrip.com and Baidu ( BIDU) as strong, elite tech firms worth looking into. The KraneShares CSI China Internet exchange-traded fund ( KWEB) consists of these companies in its top holdings and is trading at about $50 per share.
India has a young workforce. “If demographics are destiny, then India’s future is rather bright,” says Joseph P. Quinlan, head of market strategy for Bank of America, Global Wealth & Investment Management. “In a world rapidly aging and confronting shrinking working age populations, India is an outlier — on track to become the youngest country in the world by 2020.”
Quinlan says India’s millennials account for roughly 34 percent of the total population and a staggering 46 percent of its workforce. The median age of India in 2017 was a spry 27.3 versus China (37.6), South Korea (41.8) and Japan (47.1).
“Even out to 2050, the nation’s labor force is expected to remain above a billion people, while the rest of the world largely goes in reverse,” Quinlan says. “Relative to China, the mainland’s labor force as a percentage of the total labor forced peaked around in 2015.”
With the spike in both internet use and smartphone adoption, India’s e-commerce market is set to expand from $30 billion in 2016 to $200 billion by 2027, with the number of online shoppers forecast to rise from around 60 million to 475 million over the next decade, Quinlan adds.
Presently, online shopping in India represents only 14 percent of the total internet population, versus 64 percent in China, portending tremendous upside India over the next few decades, he says.
Look past the lira’s weakness. “My No. 1 emerging market choice is Turkey, mainly since everyone seems to hate it,” says Steven Jon Kaplan, CEO and senior newsletter writer at True Contrarian Investments.
The Turkish lira currency may be in a lurch, but that also puts its average price-earnings ratio very low, making it one of the “best bargains anywhere,” Kaplan says.
“Most of the weakness in Turkey is due to geopolitical maneuvering, which rarely affects corporate earnings,” he says. “The weak Turkish lira is a plus for the stock market, since it means that wages in Turkey are being paid with fewer U.S. dollars while goods and services of Turkey’s corporations continue to be sold at the same U.S. dollar prices worldwide. This means that profit margins in Turkey are expanding.”
South Korea has little political risk. A value investor would look to countries with low P/E ratios, as a larger margin of safety exists when markets have lower ratios, says Robert R. Johnson, principal at the Fed Policy Investment Research Group in Charlottesville, Virginia.
These include Argentina (9.2), Hungary (9.3), Pakistan (8.6), Russia (5.5), South Korea (8.1), and Turkey (6.1), but of these, South Korea is the most attractive as it has lower political risk than the other countries, a strong market economic history and a reasonable expected GDP growth rate at 2.7 percent, Johnson says.
[See: 10 Great Ways to Buy Emerging Markets.]
With the risk of war breaking out between North and South Korea “greatly mitigated,” there is a good chance that valuation multiples for South Korean stocks could rise from current levels, says Adam Strauss, a certified financial planner and co-CEO of Appleseed Capital in Chicago.
Top South Korean value stocks include Samsung Electronics and Hyundai Motor Co., Johnson says.
More from U.S. News
7 International ETFs to Insulate Your Portfolio
9 Overseas Dividend Stocks to Buy Now
7 Robo Advisors for Sophisticated Investors
5 Promising Countries for Global Investment originally appeared on usnews.com
