Definitely locally hosted. That is the only advantage local ISPs have over international ISPs, and for many businesses, especially bigger businesses (the MEs in SME) it doesn't make sense to host internationally. There are issues of latency, international submarine cable downtime, routing, confidentiality, legal issues, etc.
When things go wrong, and they DO go wrong from time to time, you want to be able to sort it out quickly, locally, and without needing to make costly international phone calls, or use crappy VOIP services. Sometimes you might even want to walk up to your server and access it directly. On the legal side, it is also very difficult, if not impossible to hold a US company accountable.
Local hosting just makes sense. But it's very expensive compared to international hosting.