David Kuo: You don't have to look beyond London to euro-proof your cash
Sunday 20 November 2011
Europe is in a mess and the signs are indicating that things could get even messier. The contagion has spread to core European countries that were once deemed to be immune.
Austria, the Netherlands, Finland and France have now been forced to pay substantially higher interest rates than Germany to borrow money.
Surprisingly, the UK stock market is perceived to be a safe haven. This is not entirely surprising given that the FTSE 100 is seen as a barometer of the global economy rather than British economic health.
Such is the diversity of the FTSE 100 index that UK investors should count ourselves lucky to have a plethora of investing choices on our doorstep. Some of these businesses have little direct exposure to the European debt debacle.
Consider British American Tobacco, which generates four-fifths of its revenues outside of Europe and is on track for another year of higher profits. Although the £57bn company has some borrowings on its balance sheet, the level of debt is small compared with the market value of the business.
Unilever is another that has limited exposure to Europe despite being Anglo-Dutch in nature. Less than a quarter of sales come from Europe, and as much as 40 per cent of revenue is derived from Asia and Africa.
Standard Chartered also has significant exposure to Africa and Asia in addition to a strong presence in the Middle East. In fact, its exposure to America, the UK and Europe accounts for only about 4 per cent of total sales. Consequently, Standard Chartered may capitalise on Western businesses looking to increase trade with the east.
The stock market may seem risky right now. But doing nothing with your money is an even greater risk – it is guaranteed to shrink at the rate of inflation.
David Kuo is director of fool.co.uk
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