Japan's Nikkei 225 Index has been among the top performing foreign stock market indices over the past several months. Over the past three months, the index has jumped more than 35% amid Prime Minister Shinzo Abe's reform plans. So, should investors be buying into the Japanese boom or has much of the enthusiasm already passed?
Japan's stock market has risen largely because of the lower yen valuation, which has helped many of its large exporters post record profits. For instance, Toyota Motors recently reported profits that soared past analyst expectations. Unfortunately, the yen's valuation may begin to level off, as the forex market has priced in a lot of the rhetoric.
The question is now whether long-term structural reforms will be successful. If so, Japan could see a lengthy bull market after decades of stagnation, making the Nikkei and other Japanese investments favorable holds. But until there's more clarity, investors may want to seek out undervalued names, perhaps like Carl Icahn's new target - Sony Corporation (SNE).
Hong Kong is known as the world's freest economy and a leading international financial destination, although its performance has suffered a bit from China's slowdown. The country's benchmark Hang Seng Index has jumped 2.24% so far this year and 20.15% over the past 52-weeks, which has lagged the S&P 500's 16.67% and 26.90% performance, respectively.
However, international investors know that emerging markets in Asia represent a key component of future global growth, making Hong Kong an important investment destination alongside other countries like Singapore. Those looking for exposure may want to check out the iShares MSCI Hong Kong Index ETF (EWH) for their portfolios.
Chinese stocks appear to be priced relatively cheap by historical standards, suggesting that investors may want to transition from real estate to equities, according to a recent article in the Wall Street Journal. While the real estate market may have been a big winner between 2008 and 2012, the country's equity markets took a significant haircut amid investor skepticism.
Chinese families investing in the local Shanghai Composite lost money for the most part - 56% of the time at least, according to the article - with about 22% breaking even. Stocks are now trading at a 27% discount to their historical averages based on price-earnings ratios, while many other countries in the region are trading at steep premiums.
As a result, even international investors may want to take a look at China's stocks.
Canada's economy has shown several signs of improvement over the past few months. In February, economists upgraded their forecasts for the first quarter following greater than expected growth, although the central bank is expected to keep rates steady.
These gains are being driven largely by the potash mining, oil and gas, and manufacturing sectors, which could help boost major indices like the TSX 60 index. U.S. investors looking to build up their exposure may want to check out the iShares S&P/TSX 60 ETF (NYSE: XIU).
Hyundai Motor reported a 15% drop in net profits that it attributed to a 4.5% rise in the South Korean won versus the U.S. dollar. The unfavorable exchange rate hurt the company's export sales, while industrial action limited its ability to increase manufacturing capacity.
The fall in profits highlights the importance of exchange rates for international investors. Reading and identifying trends and changes in exchange rates can be very useful in projecting potential problems for many foreign stocks and ADRs, such as Hyundai Motor.
The U.S. has always been the preferred place to list ADR securities worldwide, but some companies are now finding that it's not worth the cost. Ooredoo reported this week that its subsidiary, Indosat, intends to file a Form 25 with the SEC on or about May 16th.
While the company pursued an ADR in 1994 to enhance liquidity, the company has now found that the Indonesian Stock Exchange has matured significantly and affords the opportunity for foreign institutional funds to invest directly in the company's shares.
Emerging markets and other newly industrialized countries have been making some big changes over the past few months. Brazil's central bank announced that it would hike interest rates by 25 basis points, Turkey has continued to cut its interest rates by 50 basis points most recently, South Korea and Colombia introduced stimulus packages, and China announced that it would further relax its foreign exchange market trading band.
International investors dabbling in these countries should keep a close eye on these events moving forward. Rising interest rates could hurt stocks, stimulus packages could boost them, and Chinese currency dynamics impact many developed countries that trade with it.
The eurozone hasn't seen many signs of recovery lately, but industrial production seems to be a bright spot in the region. The 17-nation currency bloc reported a 0.4% rise in industrial production in February, which surpassed the 0.2% rise projected by economists. However, the move only partially offsets January's 0.6% move lower.
The Netherlands and Slovenia were the strongest performers, seeing a 3.4% rise, while Estonia and Malta were the two weakest countries with a 3.9% drop. The region's largest economies, including Germany and Frace, also rose by 0.9% and 0.8%, respectively. In the end, these are positive signs if they can continue in the months ahead.
The global materials sector hasn't been the best performer in the market, with the economic slowdown hitting the U.S., China and Europe. Commodity prices have also remained under pressure, squeezing margins for many major commodity players in the space. But, those dynamics could change if a recovery takes hold in Europe and the U.S.
At the same time, the materials sector is one of the few places that still seem cheap in the stock market. Many commodity-focused stocks in the sector trade with single-digit price-earnings ratios, while chemical stocks trade at a reasonably fair value. Those looking to play a potential rebound may want to consider one of the many global materials ETFs or ADRs.
Utility stocks generate a steady income over time that's paid out via dividend, thanks to relatively predictable consumer demand for electricity. Investors looking for an easy way to invest in this asset class around the world may want to consider the iShares S&P Global Utilities Sector ETF (NYSE: JXI), which offers an attractive 3.92% dividend yield and 0.71 beta coefficient.
So far this year, the index is trading up more than 7% thanks to strong demand for income equities, but some analysts are predicting that utilities will post flat returns for the rest of 2013. Either way, investors comfortable with sacrificing some capital gains for a steady income and low volatility may want to consider adding a stock like this to their diversified portfolio.