Think global, act local
Investors can still take part in global markets by investing in their local multinational stocks, says Merrill Lynch Investment Managers head of investment strategy and research Ewen Cameron-Watt.
Investors can still take part in global markets by investing in their local multinational stocks, says Merrill Lynch Investment Managers head of investment strategy and research Ewen Cameron-Watt.
“I can invest in a large number of multinationals listed on the ASX such as News Corp, CSL or BHP, yet the investor thinks they are investing in Australian stocks,” he says.
“In London, I can invest in Shell or Unilever, in Finland Nokia, or in the US, a company like Microsoft. All are multinationals with global business.”
Cameron-Watt says there is still an investing strategy for local stock markets. “The local markets have a role of supplying capital to small to medium-sized companies, and as an exit strategy for venture capital investments,” he says.
Multinationals are now an asset class in their own right, not linked to any exchange. “A local listing for a multinational is like a flag of convenience in shipping,” Cameron-Watt says.
Globalisation of markets has been in the news recently with Australian miner North being bid for by an UK and South African multinationals (Rio Tinto and Anglo) while pressure on the bidders came from the Japanese customers of North.
Investors in multinationals should still pay attention to the sector and country mix of a portfolio, Cameron-Watt says. At Merrill Lynch, the investment strategy has about 60 per cent of the returns from sector-specific investments and the rest from country-specific selections.
The recent rise in Australian resources stocks was due to the multinational Anglo looking for buying opportunities outside its South African base, he says.
“Multinationals have outperformed other indexes in the past five years because of the economies of scale they are achieving,” Cameron-Watt says.
“However, multinationals can become overvalued despite outperforming the local stocks.”
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