Decade closes with multipolar world. SMART INVESTING

CONSENSUS is an elusive thing among world-wise investors. But give or take an opinion, the international scene going into 1989 looks like this to them: There are few bargains in Japan's stratospheric stock market (see table), but some domestically oriented companies are worth considering. North America is shaky; watch out for a late 1989 recession. The East Asian tigers - South Korea, Taiwan, etc. - are still on a growth track. And Europe, long a laggard in economic dynamism, is attracting everyone's interest as it unites into a single market.

If as the decade closes the political world is going multipolar, so is the financial world. It's not enough for internationally oriented mutual fund managers to like only East Asia or Europe or North America.

As M.David Testa of Rowe Price-Fleming International in Baltimore puts it, while the US will continue to chug along into 1989, the Pacific Basin should have ``continued mutually reinforcing intraregional economic growth'' and the European Community should look more and more favorable. Worldwide, he says, corporate profits will rise at a lower level next year. So the wise investment policy is to look for value and long-term growth.

Gavin Dobson, who manages $182 million for Kemper International in Chicago, says while he likes Japan on a selective basis and has a small stake in other Pacific Rim nations, European stocks are a growing factor in his portfolios.

``The mood is extremely buoyant in Europe,'' says Mr. Dobson. ``It reminds me of the United States in 1980. It's on the threshold of a huge deregulatory wave.''

One year ago, in the wake of the stock market plunge, Europe was a big worry - especially West Germany, the powerhouse of the Continent. But like other financial markets, Europe's bounced back. Over the past year, Kemper International has boosted its holdings in Europe, weighting them toward Britain (14 percent), West Germany (11 percent), and the Netherlands (7 percent).

Japan, however, still makes up 34 percent of Kemper International's assets. Although price-earnings ratios appear exceedingly high in Japan, Dobson says, he agrees with many Japanese brokers who are arguing that, with an adjustment to US accounting standards, the ratios would be significantly lower. What's more, the earnings side of the ratio continues to climb, especially in sectors such as construction, printing, electric power, and electronics.

Similarly, Anthony Regan, chief of international investments for Boston-based Putnam Group, puts his preferences as Japan first; Europe second; and the US third.

``Japan should hit 4 to 5 percent growth next year with only 1 percent inflation and low interest rates,'' Mr. Regan says. ``The economic situation looks positive, and we expect that to be reflected certainly for the first quarter [of 1989] in the stock market and possibly for the first half as well.''

But Japan's strength is old news. Consequently, there are few bargains left in that market. Europe, however, is a different story. Regan says the 1992 ``single market'' program is prompting high levels of capital spending as companies gear up for a 330 million-strong consumer market. He also expects more takeover and buyout activity as companies jockey for position.

``Nineteen ninety two has really stimulated corporate managements into planning ahead in an optimistic manner,'' Regan says. The only trouble spots among the EC economies, he notes, are Spain and Britain - both feeling the effects of overheating from too-high growth. They will have to get that under control in '89.

The market not on top of most lists is the US. At least one veteran international investor, however, sees reason for long-term optimism about the US. John M. Templeton, who cares for 26 mutual funds worth $13 billion for 700,000 investors, says that over the next five to 10 years he expects ``another bull market, and a very big one.''

This is because of shrinkage in the supply of stocks caused by mergers and buyouts, he said in a recent phone interview from his Nassau, Bahamas, office. Couple that with unprecedented increases in available cash, and a big run-up should occur.

Unlike Mr. Dobson and Regan, Mr. Templeton is most worried in the near term about Japan.

``Twenty-five years ago,'' he says, ``we paid less than three times earnings for many Japanese stocks. Now some of them are selling for more than 64 times earnings. That is the greatest single worry I have about the financial markets.''

The best values today, he says, can be found in South Korea, Hong Kong, Taiwan, and New Zealand - ``but each investor really has to search.''

High-priced and low-priced markets Price-earnings ratios as of Oct. 31. The higher the numbers, the less of a bargain stocks are. Japan 52 Hong Kong 11.3 Australia 12 Britain 11 W.Germany 15.4 Netherlands 10.1 Switzerland 13.9 France 11.7 Italy 14.6 Spain 16.3 United States 11.8 Source: Morgan Stanley Capital International Perspective

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