By LAWRENCE J. De MARIA

Published: July 31, 1987

Foreign investors, buoyed by a renewed confidence in the stability of the dollar, are helping to push prices of American stocks to historic highs, according to traders and international market experts.

These experts say that, contrary to widespread assumptions, not all the credit should go to Japanese buyers. They point out that other foreign investors have been attracted to the American market because of its liquidity. And other factors besides the stable dollar, such as deregulation in some foreign nations, are also spurring the flow of funds into American equities.

»It’s not only the Japanese,» said Leon C. Brand, international markets analyst for Merrill Lynch. »It’s Europeans, as well as Australians, and so on. The Europeans have ample cash. The German banks, the British banks, British portfolio managers — they have been allocating more and more money to put in the U.S. to balance their portfolios.» Inflow May Double This Year

By some estimates, the net influx of overseas money into American stocks will double this year, to around $40 billion. Yesterday, foreign institutional buying was an important factor in helping the Dow Jones industrial average post its seventh straight increase — and a new record. The blue-chip average rose 27.90, to 2,567.44. [ Page D1. ] Market experts are quick to point out that foreign funds are not »fleeing» to the United States, as they might in a crisis. There is plenty of action in foreign markets as well. The Japanese, for example, have been big buyers of Canadian and Australian oil, mining and precious metals stocks.

»It’s a world bull market,» Mr. Brand said, adding that markets in Britain, the Netherlands, Switzerland, Belgium, Australia, Canada, Singapore and Hong Kong have all hit highs recently.

Indeed, many equity markets elsewhere have outperformed the American market, and some experts believe this will bode well for American equities.

Mr. Brand, for example, ranks the United States stock market, despite a gain of 35.4 percent since the beginning of the year, as only about 12th or 13th so far this year among the major equity markets that he follows. And he contends that American stocks will attract even more money — and perform even better — as foreign markets become too expensive.

Foreign investors have long favored the American stock market, for its efficiency, its relative stability and, above all, its liquidity. They can buy and sell American equities quickly and with little trouble.

But the recent flow of foreign investment into American stocks is primarily a reflection of the dollar’s new stability. When the currency fell sharply in the spring, to about 138 yen to the dollar, for example, foreign investors were scared away from American equities, turning instead to their own or other foreign markets. The Dow, which had climbed steadily in the first quarter, stalled in a range of 2,200 to 2,400.

»They thought it was going to 120 yen,» Mr. Brand said. That being the case, he said, it made no sense for a foreign investor to buy an American stock in the hope that it would go up, say, 10 percent, because any gains would be lost in currency exchange.

A number of experts said the Japanese and Europeans placed more emphasis on the dollar’s stability than on its value against a particular currency. As long as the dollar holds steady, foreign investors can make firmer judgments about how their investments in the United States will pan out.

Many analysts are now confident that stability has been achieved. Bernard J. Spilko, the managing director of Bank Julius Baer, the New York branch of the big Swiss bank, said, »The risk of volatility in the dollar and in interest rates is virtually nil.» Strong Earnings Reports

Moreover, while the price-earnings ratios of American stocks are high by historical standards, they are reasonable when compared with those of some foreign stocks. In addition, the ratios are being tempered by the strong earnings reports now being turned in by many American companies.

Therefore, European buyers have been gravitating to American stocks, especially because competing investments, such as bonds, have not been rising. Mr. Spilko’s unit receives its stock orders from Zurich, and while he had no exact figures on the flow of money, he said, »It’s phenomenal.»

The American stocks that foreign investors continue to feel most comfortable with are the blue-chip issues, such as I.B.M. General Motors and Procter & Gamble.

Not only can such large-capitalization stocks absorb vast amounts of money, but they are also traded on major exchanges in Europe and Asia, making them »household names» to foreign investors. Moreover, the blue chips are followed by the research departments of the major American securities houses, including Merrill Lynch, Morgan Stanley and Salomon Brothers. And foreign investors, particularly the Japanese, must still depend upon American research. Search for High Quality

Paul H. Aron, vice chairman of Daiwa Securities America Inc. in New York, said that the propensity of foreign investors, particularly the Japanese, to buy high-quality issues inflates the influence of foreign investors on the American stock market.

»It’s at the margin that really counts,» said Mr. Aron, whose firm is one of the four leading Japanese securities firms trading in the American market. The others are Nomura, Nikko and Yamaichi.

Mr. Aron, citing the orders Daiwa is getting from Tokyo as well as figures from the United States Treasury, said that Japanese buying had been increasing dramatically.

In 1980, he said, the Japanese bought $1 billion in American equities, but they also sold $1 billion, so their net participation was a wash. But last year, the Japanese bought $27 billion in American stocks, with a net purchase of $3.25 billion. And in the first quarter of 1987, Japanese banks, insurers and trusts were net buyers of $3.5 billion in American equities. U.S. Stocks Sold Abroad

Mr. Aron pointed out that Japanese institutions also buy American stocks on exchanges in London, Tokyo and elsewhere, so that the Treasury figures are, if anything, understated.

David Lewinson, vice president of British institutional sales at Smith New Court in New York, said the push by the European Community countries to unify European stock exchanges and to promote the free flow of investment capital across international borders also aids American equities.

»American and Japanese brokerages are positioning themselves in those countries to take advantage of that,» he said. These brokerages, he added, are funneling money into American securities.

Graph shows that foreign purchase of equities is rising, while foreign bond purchase in declining (Source: Prudential-Bache Securities) (page D3)