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Byline: Deborah Adamson Daily News Staff Writer

So you've heard about the Euro. You saw the headlines, watched a bit of the news broadcast of Europeans celebrating its debut.

But let's cut to the chase: What does it matter?

What does it matter to Joe Accountant or Jane Teacher? What does it matter to the country's 401(k)s, Roth IRAs and all the other seemingly arcane financial terms we've tried to memorize in the last few years?

Well, if you want to make money as an investor, or you want the company you work for or invest in to make money in its international deals, it matters. It matters a lot.

``It's an opportunity to invest,'' said Jerry Clebanoff, chief investment officer of City National Investments, a unit of City National Bank in Beverly Hills. ``Potentially, the growth rate in that region could be very attractive.''

For those who slept through the Euro's introduction, here's a quick primer: A new European currency called the Euro officially came into existence on Jan. 1. It will be used by 11 European nations, chief of which are Germany and France. These countries will phase out their individual currencies over the next several years.

In effect, it creates the world's second-largest financial market for investors - the European bloc. That's especially alluring at a time when analysts believe the stock markets of the United States are overvalued.

``If the Euro is launched successfully and not too many risk factors are highlighted, there are more investment opportunities in European stocks. The U.S. stock market seems really saturated,'' said Tomoko Iwakawa, corporate foreign exchange adviser for Union Bank of California in Los Angeles.

Investors can invest part of their portfolio in these nations in several ways:

They could buy mutual funds that invest in Europe or specific European nations;

They could buy World Equity Benchmark Shares; or WEBS, which are traded on the American Stock Exchange in U.S. dollars, Clebanoff said.

Buying foreign securities is much more expensive than buying U.S. stocks and bonds.

WEBS are shares of an index fund that invests in a foreign country. There's one for France, Germany, Italy and so forth.

The fund buys stocks that are part of a Morgan Stanley Capital International Index for a nation, which is similar to the Dow Jones industrial average or Standard & Poor's 500.

But unlike an index fund, WEBS are traded just like an individual stock and may be purchased through a broker.

So each share of WEBS is a slice of a diversified basket of stocks. Prices trade generally between $10 to $20 a share.

Clebanoff recommends between 10 percent to 20 percent exposure in one's portfolio.

The idea for the Euro came shortly after World War II. The goal was to link the European countries closely to avert another war.

Since political unity was difficult to accomplish, an economic union became the goal. As business became more globalized, the importance of a union became increasingly apparent.

``In order to compete with the rest of the world, Europe realized that instead of fighting against each other they needed to unite,'' Iwakawa said.

Today, there are 15 members in the European economic and monetary union. The Euro has been adopted by 11 of its members: Germany, France, Belgium, Finland, Spain, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Austria.

For now, Britain, Denmark and Sweden, won't be joining. Greece failed to qualify.

The Euro began trading on Jan. 4, for $1.17. That meant one Euro is equal to $1.17 in American dollars.

Right now, the Euro exists as an exchange rate in paper-less transactions - checking accounts, stock and bond prices, credit cards, business deals and others - and also in travelers checks. The actual Euro bills and coins will begin circulating in 2002.

The size of the 11-nation alliance, with 290 million people, will create a more stable economic and business environment, analysts say. And having one currency is a plus for the 11 nations as companies save money by eliminating the costs of exchanging currency.

``It will make the European union stronger,'' said Ken Ackbarali, senior economist at the Los Angeles Economic Development Corp.

American companies that do business in Europe should also benefit from the Euro, because instead of dealing with 11 different currencies, they only have to use one. They'll also save on currency exchange costs, plus have the added benefit of targeting one larger market instead of 11 small ones.

``I'm bullish on investment opportunities in Europe in general,'' said David Horner, senior financial strategist at Merrill Lynch in New York.

True, there's still some risk. Most economists believe the European economy's growth will slow slightly in the near term, and that could strain relations in the union.

But Clebanoff argues that foreign markets ``historically have been faster growing than U.S. markets.''

As such, long-term investors who can afford to let their investments sit for at least three years should consider buying some European stocks to diversify a portfolio.

And if it's going to hit you in your 401(k), it matters.

Primer for a new money

What is the Euro? It's a new currency for 11 European nations that officially came into existence on Jan. 1.

Which nations are using the Euro? Germany, France, Belgium, Finland, Spain, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Austria. Britain, Denmark and Sweden are sitting it out for now while Greece did not meet the minimum financial standards to qualify.

What does the currency look like? Right now, it's only in the form of an exchange rate for paperless transactions, and in travelers checks. Oh, and edible chocolate coins. Euro bills and coins will be circulated in 2002; participating countries have 10 years to phase out their national currencies.

Why did Europeans adopt the Euro? After World War II, Europeans believed it was important to unify to avert another war. But political alliance was fraught with difficulty so the goal became economic unity.

How can American investors benefit from the Euro? The Euro makes it easier and less expensive for the 11 European nations to do business with each other. As such, there are great expectations that the 11-country bloc will become a European powerhouse to rival the U.S. and a potentially great place to invest.

How can Americans invest in these countries? Buy mutual funds that invest in European stocks or buy World Equity Benchmark Shares (WEBS), which are shares of an index fund that trade just like a stock. The fund is pegged to the Morgan Stanley Capital International indexes for different countries.

What are the risks? There's no guarantee that the Euro will fly, although the countries involved are committed to making it work. This year, European economies are expected to slow. The condition conceivably could strain the European union itself because weaker countries could drag down stronger members.


6 Photos, Box

PHOTO (1-6--Color) no caption (Various Euro images)

BOX: Primer for a new money (See text)
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Title Annotation:Business
Publication:Daily News (Los Angeles, CA)
Date:Jan 11, 1999

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