International markets have been all over the map for investors -- not just literally, but also in terms of returns. Japan's Nikkei (NIKKEIINDICES:^NI225) emerged as Wall Street's darling this year, pulling in gains of more than 43% year to date. Meanwhile, China has fallen off the course after so much hype at the dawn of this decade. Hong Kong's Hang Seng (UNKNOWN:^HSI) has fallen by 3.6% -- a stunning predicament investors didn't see coming, and all the more shocking in light of the big gains seen in the U.S. and other markets this year.
But enough about 2013. Which international markets deserve your attention now before 2014 rolls around? Here are two markets to keep your eyes on -- and one to avoid -- for next year.
Japan steps on the stimulus pedal
The first market to watch for next year isn't a particular surprise. If Japan and the Nikkei haven't captured your attention already, it's time to get on board.
You might find it hard to imagine that the Nikkei and Japanese stocks can top their performance this year, and you'd likely be right. Investors probably won't see 40% or greater returns in 2014 from this market -- or any market, really. Japan's bold stimulus move caught Wall Street off guard, leading to the big gains we saw at the beginning of the year. However, Japan's momentum isn't finished.
Prime Minister Shinzo Abe is advancing stimulus with a full head of steam. Tokyo is preparing a new 5 trillion yen -- more than $50 billion -- stimulus package for the first half of next year to keep the economy and businesses on track, with some of that going to tax breaks for corporations. Japan's newly approved sales tax, meanwhile, will help assuage fears about the country's burgeoning public debt -- the largest such burden in the world. Finally, Abe's fight against inflation should help to continue driving down the yen, which makes for a strong situation for leading Japanese exporters going forward.
Which individual stocks could shine? One leading Japanese exporter has taken a beating this year, but it could be primed for a rebound. It's Komatsu (NASDAQOTH:KMTUY), the world's second-largest mining-equipment manufacturer in the world and a global industrial leader. Komatsu suffered during the machinery and manufacturing sector's downturn like many of its rivals, and sales have been slumping. However, the falling yen will only help Komatsu's overseas strength, and given the manufacturing sector's cyclical nature, this company -- along with its stock -- is in a prime position to take advantage of an eventual rebound.
China looks to rebound
China, the laggard of 2013, should see a much better 2014.
Many Chinese stocks haven't performed up to snuff this year. The Hang Seng's performance is just one example of that. However, while Wall Street has lamented the vague signals from China's recent Third Plenum, an important economic and policy meeting, there are hopeful signs from across the Pacific for investors.
The Third Plenum might not have said much specific, but it offered up a strong, broad path for China's long-term future. China is still transitioning toward the market economy that investors need, but the Plenum's commitment to cutting back investment restrictions and boosting the support of private enterprise -- while still furnishing state-owned enterprises that have long played a major role in the Chinese economy -- set a solid foundation for Beijing to build upon without locking itself into a single, overly specific direction.
Don't expect to see Japan-like growth out of China next year, but the Hang Seng should rebound from its lackluster 2013 performance so long as China begins to pivot toward embracing private business. Keep an eye on China Mobile (NYSE:CHL) for the next year. This stock has done terribly in 2013, but China Mobile is launching a nationwide 4G LTE network soon, and talk continues to swirl that China Mobile could be close to a deal with Apple -- a firm its two most prominent rivals already have agreements with. Getting on par with its competitors would be a huge victory for China's largest mobile network while helping this stock bounce back from its recent woes.
Stay away from France
France's CAC 40 stock index has made a nice year out of 2013, surprisingly, gaining more than 13% year to date. Yet France isn't a market investors should toss money into without some serious research heading into the future.
S&P's credit rating downgrade this month is only the latest blow to hit this beleaguered economy. The eurozone as a whole has struggled to emerge from the recession, with the exception of Germany, but France's simultaneous reliance on tax increases and failure to effect labor-market reforms pushed S&P's hand. They're valid complaints: The IMF projected back in June that France's economy will only expand by 0.8% in 2014 (0.9% according to the French government's projections), while French unemployment has hung near 10% this year.
The storms are adding up to a volatile mix of a labor market in need of change, a business climate hindered by Francois Hollande's goal of boosting budget shortfalls with taxation increases, and the European economy's overall ongoing malaise. Investors beware.
Shaping up for a strong year
Despite France's and Europe's troubles, 2014 is looking like a good year for investors around the world. Don't expect the kind of gains we've seen from markets in 2013 -- particularly if the U.S. taps the brakes on quantitative easing, as it must eventually. However, falling American unemployment, a shift to sustainable long-term growth in China, and Japan's surge should all contribute to the ongoing global recovery that has dug Wall Street and Main Street out of the fallout of the recession.
Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool owns shares of China Mobile. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.