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A Global Perspective: The Possibilities in International Equity Investing

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International Equity Investing

The Possibilities in International Equity Investing

When we’re in our comfort zones, we’re more likely to feel safe and familiar—and this same psychological effect is at play when we’re choosing where to invest. In fact, it’s widely understood that investors tend to prefer investing in their home country instead of taking a more global perspective, a behavior known as home bias.

However, investors could consider expanding their geographic exposure. From Shanghai to London, 20 of the world’s stock exchanges have a market capitalization above $1 trillion.

This infographic from MSCI highlights the possibilities in international equity investing. Let’s dive into some of the key concepts covered in the visualization.

Consider Correlations

For starters, by looking abroad, investors may be able to include markets in their portfolio that have relatively low correlation with their home market. This means the market movements are not as closely aligned, and the markets may behave differently from one another.

For instance, the U.S. has varying degrees of correlation with international stock markets. A correlation of 0 indicates there is no relationship between the market movements, while a correlation of 1 indicates that they move the exact same percentage in the same direction.

CountryCorrelation With U.S. Market
Japan0.11
Taiwan0.21
Korea0.24
China0.43
UK0.58
France0.59

Daily correlations based on data from December 31 2015-December 31 2020.

In the past, adding less correlated markets to a portfolio has helped to reduce overall volatility.

Manage Potential Concentration Risk

Technology companies have become more dominant in major U.S. stock indexes due to their strong performance. In the MSCI USA Index, for example, the weighting of FAANG stocks has doubled from about 8% in 2019 to more than 16% in 2021.

This increased concentration means that more of the performance and risk of each index can be driven by this small number of stocks. Branching out geographically can help to reduce that concentration risk.

Access Alternative Revenue Sources

Investors that focus in the U.S. may find their exposure to revenues and potential growth from other regions is limited. For example, only 31% of the MSCI USA Index’s revenue exposure comes from areas outside North America.

On the other hand, the MSCI All Country World Index derives about 70% of its revenue exposure from regions outside North America. As investors move towards a more global portfolio, they increase their exposure to revenue and potential growth from other regions.

Gain Exposure to Economic Growth From Other Regions

While GDP growth in developed economies has been more consistent, growth in emerging markets has been higher. For example, emerging markets typically experience higher GDP growth as they transition to industrial economies with higher standards of living.

Here is historical and projected data for various regions, based on average annual GDP growth.

Historical and Projected GDP Growth by Region

2001-20202021P-2025P
Europe1.45%2.82%
North America1.63%2.84%
Pacific2.52%2.80%
World3.33%4.12%
Emerging Markets5.12%5.10%

Note: Projections as of April 2021. The Pacific region represents Japan, Hong Kong, Singapore, Australia, and New Zealand.

Emerging markets had GDP growth that outpaced other regions in the past, and the International Monetary Fund projects that they will continue to experience above average growth.

Increase Exposure to Innovation

Thematic investing is one way to gain exposure to innovation, and international investing is another potential method.

Innovation goes far beyond Silicon Valley, and is heating up abroad. In fact, over 70% of total R&D spending in 2018 originated outside of North America. Israel, Korea, and Taiwan were the top spenders as a percentage of GDP. By taking part in international equity investing, investors can aim to capitalize on new developments.

Access Attractive Valuations

Emerging markets have an attractive price relative to their return on equity, a measure of a stock’s profitability.

Price to Book ValueReturn on Equity
U.S.4.413.7
Emerging Markets2.09.2
Europe & Middle East1.98.5
Pacific1.66.4

Data as of December 2020.

Emerging markets offer the second highest return of equity of the group, at a much lower price to book value than U.S. stocks. In other words, emerging market stocks offer strong investor returns in comparison to the price paid to obtain them.

Broadening Horizons With International Equity Investing

While many investors succumb to home bias, they could consider a wider set of investment options around the world. By engaging in international equity investing, investors can:

  • Aim to increase diversification and manage risk
  • Take advantage of growth opportunities
  • Access emerging markets

Global markets are changing. As innovation and growth accelerate outside North America, investors may want to consider new possibilities.

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Markets

The Most Popular TV Brands in the U.S.

Korean brands dominate the U.S. TV market.

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A stacked bar chart ranking the most popular TV brands in the U.S.

The Most Popular TV Brands in the U.S.

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

Every year, over 40 million TVs are sold in the U.S., making the device a flagship technology in many American homes.

In this graphic, we illustrate the most popular TV brands in the U.S. based on a 2023 Statista survey of over 8,000 American adults. Respondents were asked, ‘What brand is your main TV?’

Korean Brands Dominate the U.S. TV Market

Samsung and LG combined account for 52% of the TV market share. Interestingly, the two firms have a partnership in place, with LG supplying OLED TV panels to Samsung since 2023.

TV BrandCountry% of Respondents
Samsung🇰🇷 South Korea33
LG🇰🇷 South Korea19
Vizio🇺🇸 U.S.11
Sony🇯🇵 Japan7
Hisense🇨🇳 China5
TCL🇨🇳 China5
Philips🇳🇱 Netherlands3
Insignia🇺🇸 U.S.2
Sanyo🇯🇵 Japan2
Toshiba🇯🇵 Japan2
Sharp🇯🇵 Japan1
Other or don't know--9

Vizio, a California-based company, holds the third position, but its TVs aren’t manufactured in the United States. Rather, they are produced by Taiwanese companies AmTran Technology and Foxconn, the latter being a major manufacturer of the iPhone.

Further down the ranking is Insignia, owned by U.S. retailer Best Buy. While it’s uncertain who produces Insignia TVs, some speculate they’re made by China’s Hisense.

Despite holding the largest market share, South Korea ranks behind Japan in terms of the number of companies among the top brands. Japan boasts four brands on our list, with Sony ranked 4th overall, capturing 7% of the responses.

Growing Market

The U.S. is witnessing a surge in demand for high-definition televisions, driven by consumers’ desire for a more immersive home viewing experience.

Globally, the U.S. leads in revenue generation, with the American TV market projected to generate $18.2 billion in revenue in 2024.

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