Top foreign stocks for 2008

The year ahead poses challenges for the global economy - but here are some strategies that should prove fruitful.

<a href='http://money.cnn.com/quote/quote.html?symb=EWZ'>iShares MSCI Brazil Index </a>
The Brazilian market has been on a run that few countries can match. Among the world's markets only Egypt has done better over the past five years. And in the past 12 months Brazil came in third, trailing only China and Peru. That doesn't mean the Brazilian boom is over. In fact, says Arjun Divecha, manager of the GMO Emerging Markets III fund, there are plenty of reasons the bull market should continue into 2008 and beyond. For one thing, the country's high interest rates are likely to drop. While inflation has been running at around 4%, benchmark interest rates stand at 11.25%. "Those rates are going to come down," Divecha says. "It's almost inevitable." That should help Brazilian stocks in a couple of ways. Lower rates would stimulate spending and consumption, further fueling the country's $1.7 trillion economy. At the same time, lower rates would mean that investors who can currently find attractive returns elsewhere would increasingly put their money into stocks.

The best way to get in on the action, Divecha suggests, is to buy the iShares MSCI Brazil index, an exchange-traded fund that holds 56 Brazilian stocks. (Exchange-traded funds, or ETFs, are similar to index mutual funds, but you buy and sell them like stocks.) The materials sector, including the recently rechristened mining giant Vale, makes up a hefty 33% of assets. Energy companies such as Petrobras account for another 25%. Financial firms such as Banco Bradesco also compose a large chunk of the fund, 16%.
Last updated December 14 2007: 11:42 AM ET
Bank of Ireland Mobile Telesystems iShares MSCI Brazil Index GlaxoSmith - Kline Potash Corp.
Best stocks for 2008 Fortune found ten stocks that will thrive despite - or even benefit from - the troubles facing the markets next year. (more)
Six standout funds Picking the right fund takes a skillful eye. We found six standouts led by masters old and new. (more)
What's ahead for 2008? Four top investment experts look at what will move markets and shape the economy in the coming year. (more)