At this point the UK market itself is a global favourite, as it looks cheap (prospective p/e of 9.5), sterling is stabilised and interest rates are heading south. Diversification, however, is wise. In Europe, France and Spain weigh up well. Nomura's Ishibashi finds the comparatively low prices in France "quite curious". As he says, interest rates there might be up and it is an oil importer, but the economy is chugging along. He likes French hotel chain operator Accor and electronics group CGE. Europe-wide he picks Ericsson in Sweden and Siemens, Deutsche Bank and Bayer in Germany, although Germany could be held back by rising interest rates.
In the US prices are historically attractive. But selectivity is vital. Handing the headache to a clued-up fund manager seems the best course.
At Gartmore Tony Thomson continues his historical love affair with the Pacific Rim. The Tiananmen Square disaster has plunged Hong Kong prices to p/e ratios of nine and good yields, while the Malaysian and Thai economies continue their boisterous growth. Latin America too - now that some of its leaders have seen the light - has been tipped as a new growth area. Japan still looks expensive with p/e ratios over 30 and the banking sector teetering. The word is: be wary.
Equities - small companies.
"Overall, long term, small companies do better in share price performance, but from time to time they don't," says Beeson Gregory researcher George Bell. One of those times, unfortunately, is now. The Datastream USM index has lagged 40% behind the FT-A All-Share Index since August 1988. Bell says that, in earnings per share, the fledgelings average as well or even better than their bigger brethren in bad times - but the higher risk tends to chain them down.
For those who nonetheless like their shares adrenalin charged, the timing is difficult. Being illiquid, the shares drop quickly on bad news and leap on recovery, often too fast to get in. The only realistic approach is to choose carefully, buy a spread of companies at prices that look reasonable, and be prepared to wait at least two years. The reward from the tough-nut survivors can be earnings per share growth of 20% or even 50% per annum.
Hoare Govett's John Houlihan warns, however, that it now appears that "more small companies will go to their makers in 1990 than in 1982". Note: this will still only mean 2% out of a community of 2,000 stocks. He suggests that investors avoid tearing at their hair and instead take an educated guess at when a price is near bottom, then live with the result. "What you want is companies where people haven't looked far enough ahead."
Beeson Gregory names Ashley Group (Spanish supermarkets) and Cantors (discount furniture retailer) as two long-term favourites. For many investors, to get the necessary spread of risk, a managed trust is ideal.
Property - stocks.
Property is not popular. The market has been depressed since last year and no one is in a rush to get back in. Once interest rates fall further this will erase a few clouds, but the bigger problem is the huge overhang of unrented space. And bad as it is now, many more properties could yet come on the market - the "implosion following the explosion" as property analyst Alex Moss of BZW puts it. "We think the correction will continue for a year or so and then stabilise. It will then be a reasonably long time before we see a general upsurge of any size, maybe six or seven years."
Relative to the market, property stocks are now near a 20-year low, with some at up to a 50% discount to net asset value. But the word is: stay away. There is worse to come. Panmure Gordon's Michael Prew says that the rate of decline in prices is diminishing, so the bottom may be in sight, but it will be a long haul back. A false rally might develop in stocks if interest rates are again cut before the next election, but do not be fooled. Many say that it will be 1992 before property looks tempting again. If you really want to wait it out, some sturdy buys, on weakness, are Land Securities, Slough Estates, Great Portland and British Land.
Property - rental.
Lack of tenant demand is expected to continue to drive commercial landlords to drink in 1991. Of an extra 100,000,000 sq ft of central London space now planned, only half is needed. Worse still, in the 1990s the country's workforce is expected to grow little. Even as Europe ignites, little of the fire will spread here. Most big name companies that want to be in London are already here. BZW predicts that the 1990s will show low UK rental growth compared with the past 20 years. Nonetheless, prime office yields now of around 7.5%-plus suggest that there will be some tempting property buys to come if yields go on to 8.5%.