Just some general rules of thumb on that general subject:

In terms of the currency exposure of your holdings, ignore where the company is incorporated and where it is listed. What matters more than anything is the geographic distribution of their revenues.

The secondary importance is the geographic (currency) distribution of their expenses. A firm that is mostly an importer/retailer will be in trouble if their home currency falls, and have windfall profits if it rises. A firm that is mostly make-locally-and-export will have the reverse situation.

But it's important to make the distinction between actual changes in profitability for those unbalanced firms, and apparent changes in profitability due to accounting in a single currency. For example, consider a multinational a firm with fairly balanced revenue and expense exposure to currencies. They have factories in the big countries they mostly sell in. Now imagine the currency where they are incorporated falls. Their reported profits seem to go up because their "foreign" income has risen measured in shrinking local currency units, but they didn't really. It's illusory.

Jim

Non-US Stocks FAQ

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