Transcripts

Optimism Remains High For The Global Markets

SUSIE GHARIB: Investors were in a good mood around the world today as stock markets in many countries moved higher. Japan's Nikkei closed at a seven- month high Hong Kong's Hang Seng index reached a new record and stocks in Europe also gained 1 percent. Today's trading activity caps off a fantastic year for international equities. And as Suzanne Pratt reports, experts say investors should continue to look abroad in 2007.

SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: It looks like 2006 was a banner year for U.S. stock markets. But as good as it has been in the U.S., it's been even better for investors venturing overseas. With only a few exceptions, stock markets around the globe rallied strongly this year. The Morgan Stanley international world index is up more than 17 percent, outperforming the Dow and S&P 500 and on the way to its fourth straight annual gain. Many experts predict 2007 will be another good year for international stocks. Citigroup global strategist Clark Winter says part of the reason is that lower global interest rates mean companies can actually put money to work.

CLARK WINTER, CHIEF GLOBAL STRATEGIST, CITIGROUP PRIVATE BANK: It matters not who the politics are. Lower interest rates for a prolonged period of time means a lot of money can go back to work around the world. It means that borrowing, infrastructure, capital development, real estate around the world all of a sudden becomes not only attractive, but financable (ph).

PRATT: Experts say the prospect of an extended boom in mergers and acquisitions also may lift share prices next year. According to Thomson Financial, announced global takeover activity of nearly $4 trillion was a new record this year, beating the previous record set in 2000. Four of the six biggest announced deals in 2006 involved European companies. Forecasts of sustained weakness in the U.S. dollar also causing stock market pros to look overseas, especially as U.S. investors have the added benefit of currency translations. HSBC currency expert Bob Lynch believes the dollar will remain under pressure.

ROBERT LYNCH, CURRENCY STRATEGIST, HSBC: We expect the Fed to begin cutting rates in the second quarter of 2007 and to continue to lower rates through the remainder of the year. We think the economy is going to slow to below 2 percent growth for 2007. And that dynamic, lower interest rates, lower growth, should result in a weaker dollar over time.

PRATT: Global strategists predict stock markets all over the world will do well in 2007. Some, however, see the best opportunities in countries with highly educated workforces.

CLARK: Look for those countries and/or companies that are doing the best job of allowing people to go back to work. So UK and Ireland within Europe have done the best job. We're all very intrigued what might happen in France.

PRATT: Clark also likes India and China, equity markets that also did extremely well this year. Most international experts are not predicting the same high returns in 2007 that investors experienced this year. The biggest problem, they say, is valuations, which are already stretched in many foreign markets. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.