Dealing with Foreign Markets – How Investors Can Utilise Foreign Markets
By Ben Barlow of UMS Freelance
There
are a lot of benefits to diversifying your portfolio and exploring markets outside of Australia. Overseas
investments can offer plenty of new opportunities to profit from. Of course, it
isn’t that simple, or everybody would be doing it too. A lot of effort must go
into any kind of investment you make outside of the market you understand best to avoid bad decisions
that can cost you dearly. However, with the right research and advice, you can
fare well if you do make the decision to branch out. Here are some points on
the whys and why nots of working with foreign markets:
Currency
Value
Right
now, Australia’s currency is strong. It bounced back in May and is still
sitting comfortably above US78c. This is good news for travellers, but bad news
for Australian export businesses. Aussie travellers now have more buying power
abroad, particularly when they travel to the UK, Canada, and New Zealand, where
the local currency is weaker against the AUD. A strong currency is also good
news for anyone who loves to shop online. It’s bad news for exporters, however,
as the AUD makes Australian products far more expensive for overseas customers.
For
businesses that import goods from overseas, a strong AUD is a good thing, as
they have more buying power. Importing supplies becomes less expensive,
particularly from countries such as the United States, Japan and the UK.
Importing from countries with a weaker currency reduces costs in the supply
chain and allows for greater profit margins.
This
is all simple economics, but something you need to investigate quite heavily if
you want to deal with foreign markets. Learn about forex markets and follow the markets
in any countries you want to deal with – after all, these things can change
very rapidly. Australia may have a strong currency right now, but currencies
fluctuate daily, depending on macroeconomics and global events, so the value of
your investments could change very easily. Keeping up with political and
macroeconomic news in any country you might invest in or trade with is
therefore crucial.
Emerging
Markets
While
we have touched on trading with major economies like the USA, Japan, Europe and
the UK, another benefit from foreign investment is when you get in with an
emerging market at the right time. China, for instance, has a growing middle
class of an estimated 300 million people, and this may be a good target
audience for luxury imported products as they tend to enjoy shopping for items
that are made in the West as these can be seen as more luxurious.
This
is a huge market for American, European, Chinese and Japanese businesses now,
but can also be tapped into by Australians who are China’s sixth largest trade
partner. Investing in property and business in emerging markets can also be
something to consider. Brazil, for example, is a country that is having something
of a business boom, and there are also interesting projects going on in the
Caribbean that could inspire the right type of investor.
Should
You Try It?
The
problem is, of course, that emerging markets tend to be culturally and
linguistically quite different from Australia. Engaging with them can be quite
profitable however will require a lot of research and travel, and this is
something off-putting to people who’d rather deal with the Western, English
speaking markets they already know well.
The
idea of dealing with completely different audiences and markets may be a bit
intimidating, however it can work out well for the people willing to put the
work in. What you will need however, is contacts in your country of choice who
can help you understand and learn. Things like exchange rates, politics and
business etiquette you can learn from online research, but you won’t truly feel
tapped into the market unless you have someone on your side who is part of it.
If you can get that kind of connection going, are willing to learn about
another culture, and possibly learn another language (for instance, in India
and many parts of the Caribbean, English is the first language anyway, however,
if you decide you want to work with Brazil you’ll need Portuguese), you may
have a better chance to make some great investments.
Business
is very international, and being global can generally be a wise move, but do be
prepared to put some work in.
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