US Investors Going Offshore For Higher Returns

by Phillip Morton, Investors Offshore.com

08 October 2003

Recent figures show that for the first time in five years American investors are putting more money into offshore investments than foreigners are spending in buying US equities, according to recent data released by the United States Treasury and investment bank UBS.

Reasons for this are basically threefold, say analysts: the fall in the value of the dollar; the need for funds to diversify after a strong bear market cycle; and the under-valuation of foreign assets compared to their US counterparts.

As Cesar Molinos, global asset allocation specialist at Merrill Lynch observed in a recent FT report: "the equity bear market has exposed pension funds' risks, so there is more pressure to diversify. There is a very good case for being overweight in offshore assets right now," he said.

Meanwhile, in the same report, Pascal Constantini, global equity strategist at Deutsche Bank, observes that US equities and assets are "vastly overvalued" in comparison to other areas of the globe and has been advocating a shift to offshore investment for the past year. "For currency reasons, if nothing else, people should be re-allocating more offshore right now," added Constantini.

According to the analysts, it appears that Asia is the most popular choice for the international investor, particularly in the emerging markets area, and Molinos rates India, Thailand and Indonesia as the areas with most potential for growth.

"[These] markets have come up, but their valuation is still significantly low," said Mr Constantini. "They stand well above Europe, Japan and the UK. There is not much to choose between those three," he observes, adding that the healthcare sector currently offers "temendous value" globally at present.

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