The high level of European investment in the United States is expected to continue in 1979 -- and beyond -- despite rising American inflation and the threat of an economic slowdown.
"Everything is relative," said to Roger Sherman, a foreign investment specialist for the Illionis Continental Bank in London. "For Europeans, the overriding consideration as far as American investment is concerned is the political and social situation. They all think that is better in the U.S. than over here."
Another factor which is thought likely to go on attracting European investors is the weakness of the dollar. In the view of Sherman and other experts here, it would have to strengthen to an exchange rate of approximately 2 1/2 German marks to the dollar -- which is nearly 40 percent higher than its current value -- before European corporate investors would be "scared off." Nobody interviewed here believes that will happen in the near future.
However, if the weak dollar helps to boost foreign interest in buying up Amercan companies and in the purchase of U.S. real estate, it has influenced overseas investment in the American stock market in the opposite way.
It is definitely a negative factor, according to Robert Dennery of the Paris-based Eurofinance Corp.
"When it comes to putting their money into U.S. stocks, the Europeans face three problems," he said. "They have to determine the relative strength of the U.S. stock market will perform. Finally, they must weigh the monetary problems. They have to consider whether their U.S. stocks will rise enough to offset a possible further decline in the dollar. After all, if the stock market rises by 10 percent, but the dollar drops by a further 10 percent -- which isn't impossible -- where does that leave an investor?"
Dennery said that it was him impression that "French money managers are doing nothing with the U.S. market right now. Of course, they can always change their minds later on."
The same appears to be true of western European branches of many U.S. brokerage houses. The head of the Paris branch of one of the better-known New York brokerage firms, who asked understandably enough not to be identified, admitted that "we have been sitting on our hands for several months. Business has dried up."
While that situation appears general throughout western Europe, he said that it was somewhat worse in France. Traditionally never among the biggest investors in U.S. shares, French interests in the American market had been growing by leaps and bounds until last spring. Then, new legislation was approved here to induce Frenchmen to put their money into their own badly sagging stock market.
The so-called Monory Law, named for France's economics minister, offers significant tax exemptions to individual investors in local stocks. It also stipulates that mutual funds can obtain similar tax relief it 60 percent of their portfolios are invested in the French market.
"The result has been to move out of American shares and into French ones," the American stock broker said. "The Paris Bourse has been booming.But we haven't."
The very same circumstances that have tended to dim interest in the U.S. stock market keep foreign investors' hearts palpitating as far as American real estate is concerned. But, in that sector, too, there have been changes of emphasis which many authorities assume will accentuate in 1979.
Foreign investors increasingly seem to be looking for relatively low-priced property that offers the prospect of very long-term stable returns rather than spectacular appreciation. This has meant a switch from "glamor" properties -- resorts, big-time hotels, etc. -- into more mundane agricultural lands.
According to Sherman, a "tremendous" foreign interest in buying middle western farm properties can be expected to grow. "We think (middle western) farm land prices will continue going up," he said.
But corporate takeovers remain the area of greatest attraction for Europeans. Experts here said there is hardly an industrial or commercial sector into which foreigners will not be actively seeking to buy in 1979.
Those considered to hold the greatest lure are chemicals, engineering, building materias, truch manufacture, insurance and banking. However, several informants said that Europeans are even showing some interest in specialized aspects of the American steel industry, although, as one source said, steel as a whole is considered a "no-no" by transatlantic investors.
Francis Sass, a Paris-based specialist in bringing prospective American corporate sellers and potential European buyers together, predicted that the trend toward European acquisitions in the U.S. will "gain momentum" in the coming months.
He listed three reasons: (1) The favorable currency exchange situation; (2) The European view of America as the "last bastion" where "enterprise is regarded as rewarding and laudable, and (3) The likelihood that the U.S. stock market will remain depressed until well into 1979, thus making American companies look like particularly good bargains.