World markets did not deliver as many expected

NOT THE BEST, NOT THE WORST OF TIMES

January 01, 1993|By New York Times News Service

For most international investors, particularly those who placed their money in big, liquid foreign stock markets, 1992 promised much more than it delivered. For the third straight year, home -- not East or West -- was mostly best for U.S. investors.

Money was made overseas, of course, but the gains were confined to small markets whose currencies were either tied to the dollar, like Mexico's, or not tied to the German mark, like Switzerland's.

"For most, it was an entirely forgettable year," said Jeffrey Russell, a manager of Smith Barney, Harris Upham's World Funds International Equity portfolio. "Economic conditions were difficult in many countries, European growth decelerated, and in many parts of the world interest rates were extraordinarily high."

Expectations were much different 12 months ago.

1992 was to be the Year of Europe, of vigorous growth in Japan and a building recovery in the United States.

But the Danes, then the British, torpedoed Europe's timetable, with help from the Bundesbank in Germany, whose tight monetary policies and high interest rates caused pain across the Continent.

Japan's economy, rather than growing, started to crack. And proof of the United States' recovery, such as it is, failed to materialize until late in the year.

With the exception of stocks in the United States, share prices were preyed upon by these various international woes.

Excluding the exchanges in the United States, prices on world stock markets fell by more than 15 percent in dollar terms last year, according to the world index of the Financial Times of London.

In the United States, where equity investors took some comfort from steady declines in interest rates during the year, stock prices rose by more than 4.8 percent, according to The Financial Times.

"It was the year of the false dawn," said Marcus Grubb, an international equity strategist at Salomon Brothers in London. "But it was not until May that the season of hope ended and the season of reality began."

It was in May that Danish voters upset Europe's ambitious plans for monetary and economic unification by delivering a stunning "no" vote to the Maastricht treaty, the first in a chain of events that culminated in late September, when the British government jolted international financial markets by pulling the pound out of the European Monetary System.

That decision gave the Bank of England latitude to push down interest rates, and in the fourth quarter British stock prices reacted favorably, rising by more than 12 percent in local currency.

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