With barriers down, stock rises ripple through world markets

Dow 2,000 is on the horizon. So is Nikkei 20,000 and FT 1,500. Records were set in the Sydney, Hong Kong, and Tokyo exchanges on Tuesday, and markets were moving ahead in early trading Wednesday. Many - but not all - stock markets around the world have been booming. How long it will last is anyone's guess. But surely it hasn't all been because of a comeback from ``year-end tax selling,'' as some Wall Street analysts have said. That applied only to Americans, who saw their radically new tax law take effect Jan. 1. There must be more to it.

Yet economic forecasts look the same this week as they did the week before: slow growth in the industrial world, moderate inflation, tame interest rates. The prospects for individual companies can't have become that much better in the past few days.

And, in fact, not every market is doing well, notes Peter Lamaison, president of IDS International, a London-based investment management subsidiary of IDS in Minneapolis. European markets - especially France, West Germany, and the Netherlands - are lagging.

Still, markets in many ``dollar'' countries - the United States, Hong Kong, Singapore, and Australia - all look healthy. London and Tokyo are holding their own, too.

Just what is bringing the buyers to market in all these locations at the same time?

Economists and market analysts differ on what exactly drives investors to act en masse. Most say individual factors are causing bullishness in each market. But much like the sun-moon syzygy that aggravated stormy conditions along US seacoasts last week, financial forces sometimes align just right, causing investors to snap up stocks around the world.

One element of this equation has to be the increasing global-mindedness of investors.

``What happens in one market is transmitted to another,'' says Ian Giddy, international capital markets research director at Drexel Burnham Lambert in New York. This is because banks and investment houses have legs in the major financial centers and coordinate their actions on a global basis.

And, other than exchange-rate differences - which can be adjusted for in investment calculations - similar financial conditions apply anywhere.

``Many people think interest-rate cycles have reached the point where bonds won't do so well now,'' Mr. Giddy says. ``That leads them to look at stocks for better performance.''

Computer-driven trading is increasingly international as well. A gap between stocks, options, and stock-index futures in recent days added points to the US rally. Many overseas investors also use these hedging instruments and have computers programmed to make the same moves at key moments.

Is that a crowd mentality? There may be some aspects of this at work, Giddy says, but for the most part investors are acting rationally in shifting investments around the world.

In the unbounded world of investing today, trends may be established anywhere, notes Kate Jonas, an associate with Morgan Stanley Capital International Research in New York. But the US accounts for 40 percent of global equity trade, so when New York is a trend-setter - as it has been in recent days - that has a strong influence on the rest of the world.

``You could see Denmark boom and maybe no other markets would boom along with it,'' Ms. Jonas says.

With US stocks rising, institutional investors go to their computers, check the world's potential investments, adjust for exchange-rates, and buy where they can get the most for their money.

There are ``different stories in every market,'' Jonas notes, but in general there is low inflation. The powerful US and Japanese markets, moreover, have been characterized by ``excess liquidity,'' she says, meaning a surplus of investable funds. When those are plowed into stocks, markets rise.

If the US stock market is setting the pace, then conditions that cause American investors to become bullish are indeed important. These include, as mentioned, a rebound from year-end tax selling. And a new year, with all its promise, often helps the January stock market in the US. There is also the prospect of lower interest rates, which favors equities, where returns are higher than in, say, money-market funds and certificates of deposit.

This US trend helps bolster favorable conditions that are present in other record-setting markets. Mr. Lamaison of IDS points out that the markets that look particularly strong are the old ``British colonial markets'': Hong Kong, Singapore, Australia, and the US.

Hong Kong is doing well in worldwide trade and looks attractive because of its links to China. Australia, Lamaison says, should see a long-awaited rebound in commodity prices and is in the midst of a takeover wave. Singapore is just below its recent top.

In the US, modest, noninflationary economic growth appears likely. Britain, other analysts say, should benefit from rising oil prices. And in Tokyo, financial stocks - banks, securities houses, insurance companies - have been strong, although that tends to distort the Nikkei average and might mask weakness in the future. A Thursday column