A SPECTACULAR start to 2018 by international shares has left Aussie stocks for dust.
While local shares have been flat, US stocks have surged almost 5 per cent in just one month, Hong Kong shares are up 8 per cent, and German, Korean, French and Chinese shares have also been strong.
So does that mean global shares are overvalued and heading for a big fall? Not necessarily, say analysts, who believe an improving global economy may drive further gains but warn that a short-term correction is increasingly likely.
Grabbing a slice of global shares is easier than it used to be, and a majority of super fund members own international investments as part of their funds’ default investment options.
Other investors go global through exchange traded funds or direct ownership of companies such as Apple and Amazon.
Online trading platforms such as CommSec offer direct share investment in several countries, typically costing between $25 and $50 a trade.
Nick Griffin, the chief investment officer of international equities manager Munro Partners, said 2018 would deliver strong global economic growth.
“The cycle is maturing but it is not close to ending,” he said. “Earnings growth is still strong and markets generally follow earnings growth.”
A recent report by Middleton Securities says international political uncertainty is the only real threat facing US shares, and that investing overseas makes sense.
However, it says people should avoid investing in an entire market index — which is what ETFs primarily do. “This is just an investment in big companies and this is where most of the overvaluation risks are,” the report says.
Middletons Securities adviser David Middleton said using professional fund managers was often the best way to go, and good managers were worth the fees.
He said investing internationally through a super fund could help reduce volatility and tax issues. “It’s either feast or famine with international funds.”
Choosing to invest directly in individual global companies might sound appealing, but Mr Middleton said this was difficult for most investors.
“Getting good information about what to invest in is pretty hard, and getting research is almost impossible,” he said.
Triple 3 Partners chief executive Simon Ho said global shares would be volatile this year, but there was talk of a “melt up” instead of a meltdown.
“Investors should be cautious. We have had a spectacular global equity run — especially in US equities — and it would be prudent for investors to think about portfolio protection to insulate their portfolios in the event that something untoward happens,” he said.
“The probability of that has unmistakably risen.”
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