Foreign returns lagged in '92 as dollar rallied

January 03, 1993|By Los Angeles Times

Foreign stock markets mostly lagged behind U.S. stocks' performance in 1992, and, in dollar terms, most overseas markets sank dramatically as the dollar rallied.

The upshot is that Americans investing in foreign stocks saw below-par returns, compared to domestic stock returns, for a third straight year.

In Britain, for example, London stock prices rallied 14.1 percent for the year in local currency, according to Morgan Stanley Capital International indexes. But because the British pound's value sank against the dollar's, an American investor in British stocks saw his or her shares devalued.

Result: The 14.1 percent gain for British investors translated into a 7.4 percent loss for Americans who owned the same stocks, Morgan Stanley indexes show.

Many foreign markets were weak to begin with last year, victims of a slow global economy and country-specific economic and political crises.

"European economies certainly have slowed down, plus we had the currency devaluation crisis there because of stubbornly high interest rates in Germany," noted Jeffrey Russell, manager of the Smith Barney World stock mutual fund in New York.

In addition, Mr. Russell said, Japan's market was slammed again as its once-powerful economy continued to ebb; Thailand's and Brazil's markets were rattled by political instability, and even high-flying Hong Kong late in the year was hit by renewed friction between China and the colonial government.

Among the biggest winners and biggest losers overseas in 1992:

* Hong Kong still managed to finish with a 27.4 percent gain for the year in dollar terms, according to Morgan Stanley indexes.

* The Mexico City market gained 20 percent, in dollar terms, for the year.

* Spain took one of the worst hits, losing 24.8 percent in dollar terms and 11 percent in the local currency after it was forced to devalue its currency against the powerful German mark.

* The Germans, meanwhile, suffered with their counterparts, while getting most of the blame for Europe's slowing economy. The German market index fell 11.9 percent in dollar terms and 6.2 percent in marks.

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