ASX Is a Good Play on Cooling U.S. Growth

A theory I have been working through over the last couple of years is that the U.S. will become slightly less important to the world economic order as various imbalances and deficits cause a weaker currency and higher interest rates, resulting in lower equity market returns at home.

This is not a "sky is falling" prediction, but more like a belief that domestic equities might only average 5% growth per year instead of 10%. If this pans out, it means U.S.-based investors need to expand their foreign equity horizons.

This leads me back to an article I wrote about publicly traded foreign stock exchanges about a year and a half ago. In that article, I focused on OMX Group (OMGPF - commentary - Cramer's Take) -- which has become the subject of a bidding war between the sovereign wealth funds of Dubai and Qatar -- and ASX, the public exchange in Australia.

Since that article came out, OMX has been in the news a lot on its bumpy ride to an 80% gain. Meanwhile, ASX has barely made a sound, other than a name change on the way to a 60% gain. ASX seems to have been left out of all the consolidation talk, and if there is any more consolidation, it makes sense to think that at some point one of the biggies, like NYSE Euronext (NYX - commentary - Cramer's Take) or Deutsche Bourse, will take a peek down under.

OMX Vs. ASX

Click here for larger image.

Source: Yahoo! Finance

If ASX does not get caught up in the consolidation wave, you are still looking at a company that is at the heart of a very robust economy that benefits from several important global themes. As a commodity-based economy it tends to be at a different point in its economic cycle than a service-based economy, like the U.S., which offers genuine diversification for U.S. investors.

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At the time of publication, Nusbaum had no positions in the stocks mentioned, although positions may change at any time.

Roger Nusbaum is a portfolio manager with Your Source Financial of Phoenix, and the author of Random Roger's Big Picture Blog. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Nusbaum appreciates your feedback; click here to send him an email.