US news articles on investing overseas.
Dear Mr. Matthew Rand,
I just read your article on "Buying from Afar". There much I could add. So here I go.
Getting right to the point: it is chuck-full of half- truths, and its been like this for many years. Just as Mr. Justin Doeble the then Forbes reporter knows well I have demonstrated this since 1997; on how the largest cap Thai shares fairly regularly underperform the smaller cap, high dividend paying value shares. (Last time we met some 2 1/2 years ago, I shared a smaller cap stock idea with him which since more then tripled in price, while the Thai SET index is only about 5% higher during the same time.
I was asked by Forbes about this a few years ago and promptly delivered a couple of substantial price appreciation winners, far exceeding the other selections given by another larger cap. proponent *. (Just search your Forbes data base for the article). The one year later, follow up, failed to mention which tripled in value; instead they just co-mingled it all.
Fact is, astute global individiual investors are mostly best off to trade directly with a local broker in the country they like. Among other key advantages are: it will reduces trading commissions and there is rarely any fees for dividend collecting etc.. The currency conversion is done only one time, at the time of allocating the capital to that country. None of this back and forth, at every stock trade, currency conversion nonsense.
US brokers are/remain simply un-seasoned & inward looking when it comes to buying foreign shares, and are at best very expensive. 2 years ago I visited Lehman Brothers in Chicago, where its sign says "Global Investment Bank", yet it was all but impossible to buy any foreign shares directly in an decent & reasonable way. Across the street Deutche Bank offered a far better way. Why are US brokers so lethargic about thi? Maybe its changing for the better? It should signs should be removed as misleading.
And what about a new rights’shares offerings? In the past often these were not offered to US investors whom invest in foreign shares through US brokers. The reason is because US securities law mandates a new prospectus, when new shares are offered, but this is not so in most foreign to USA countries. Instead of following these foreign countries SEC rules, US regulators just prohibit the offering of new shares, usually at a steep discount. US investors have lost out on this over time, and too often the foreign country gets blamed. I know this as in the past various US members have written about this to me unfair practice & inadequacy.
Or how about a naÃƒÆ’Ã‚Â¯ve visit to most US brokers asking about: can I buy foreign shares with you? When I did this not so long ago I was told either:
a) its against US law to invest in foreign shares.
b) Our company strongly advises against this as much too risky.
c) nobody knows about this and we don"t want to know as we don"t advocate this.
In the US you can buy just about any import product, if its better and cheaper...but dare you, good luck to you, if you desire to invest in shares of faster growing countries outside of US. As there remains a hidden camouflage of regulations and broker inaptitude against this. Not the least is the US tax law which red flags any investor whom answers yes to the incriminating question "do you have a foreign bank account". Etc..I could go on and on..
Some time ago I ran out of energy keep writing about this, as it got nowhere and remains un-reported. Maybe things have changed? Maybe you are different and willing to write about the reality of this? As seen from an individual investor standpoint. If not, in time investors will increasingly ask why have reporters not told us about this?
Today I just enjoy life and write for members only. Yet, Forbes is right about Best of the Web , in Thailand, as we are getting better every year.
Paul A. Renaud.
PS. One untold compelling reason why foreign investing in emerging country is so compelling:
In the US most smaller cap high/fast growing companies trade at a premium valuation to the market averages -while paying no or very little cash dividends. This is fully rational as a company which is growing twice as fast should in finance, rationally so, have triple the p/e valuation. Fair enough.
In many emerging markets (especially Thailand), just the opposite is true. Smaller cap faster growing companies trade at a discount to the average market p/e. And on average pay almost twice as much in cash dividends as compared to large cap stocks. Many/most have very un-leveraged balance sheets and a history of honest/hard working dealings. Yet, they are all but absent on the radar screens of institutions -as these command huge trading liquidity. Individual investors don"t demand such high trading liquidity and so have a huge advantage. You here see that oversees investing Mutual Funds are hand cuffed to most only consider buying large cap shares. In doing, these advocated funds grossly neglect the real back bone of an emerging economy, even while their shares are the investor bargains, which keep go begging. Despite this market inefficiency they have been the true performance stars, for years. I have plenty of solid evidence about this at this web site.
Why has nobody ever written about this? Would you?