How to find offshore stockmarket bargains as war shakes the world

US shares are down this year, while European and Asian markets have fared worse. Where do you look for a low-risk discount?

Anthony KeanePersonal finance writer

@keanemoney

2 min read

March 18, 2022 - 6:31PM

The Australian Business Network

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Australian shares have outperformed most global markets in 2022 and it’s prompting investors to look offshore for cheaper stocks.

While tumbling global stockmarkets have hit investment portfolios and super nest eggs, wealth specialists say weakness also breeds opportunities.

Since January 1 the ASX 200 index has dropped 2.2 per cent, making it a top performer among 10 key indices across the US, Europe and Asia. It has climbed 0.8 per cent in the past month despite Russia invading Ukraine.

The worst performers of the year are the tech-heavy and growth-focused Nasdaq index in the US, down 12 per cent, and China’s Shanghai Composite index with a 12 per cent fall.

Catapult Wealth director Tony Catt said he believed “growth stocks in overseas markets are now oversold”.

Catapult Wealth director Tony Catt says European shares have the biggest geopolitical risks.

“Good companies like Apple and Google (Alphabet) are still good companies and are still going to be growing for the next 10 years,” he said.

Mr Catt said when choosing stocks, “I ask myself where am I spending my money? Am I still spending money with Apple, am I still watching Netflix?”

He said Europe was hardest hit by geopolitical worries and could see elevated energy costs for longer and greater consumer spending risks.

“It’s a geopolitical risk you probably don’t need to take in the short term,” he said.

Mr Catt suggested investing across indices or with good active managers, and “not trying to pick three stocks where you just don’t get enough diversification”.

“Play the safe route and let the market do the hard work for you,” he said.

ETF Securities head of distribution Kanish Chugh said several of the FAANG stocks – Facebook (now Meta), Apple, Amazon, Netflix and Google – had dropped about 20 per cent by mid-March.

“Very few countries are performing well at the moment,” he said.

“We have seen institutional investors starting to allocate more heavily to Europe.”

Mr Chugh noted India’s Nifty 50 index had been one of the year’s best performers.

“Don’t have blinders on – investors always think of the US and the big mega cap names,” he said.

“Europe and India are underweight in investors’ portfolios – India’s like the big elephant in the room that everyone forgets about.”

ETF Securities head of distribution Kanish Chugh says take off the investment blinkers. Picture: Michele Mossop

Federated Hermes senior portfolio manager for global equities Lewis Grant said global earnings expectations had reduced dramatically since January and he believed 2022 profit growth for stocks would be less than 5 per cent – about half current market expectations.

“In a recessionary environment investors should focus on energy and healthcare stocks,” he said. “In healthcare we are seeing predictable growth because of demographic trends and new products.”