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Tuesday, January 16, 2007 

EU intro to boost Eastern Europe markets

Fresh foreign investment is set to boost the economies of Bulgaria and Romania, following their January 1 EU introduction.

Matthias Siller, emerging markets investment manager at Baring Asset Management, said the stability offered by the EU membership will attract both private and global investment.

He said: “With the governments adhering to EU legislation, investors now have stable predictions about investment framework in areas like property and the title of assets. While this is an on-going process, we expect to see growth in consumer-facing sectors such as banking and residential property.

“Currently there is strong worldwide liquidity, and these markets are exactly where this type of investor will be looking for opportunities.”

With investments easier to obtain, Siller anticipates strong foreign outlay into large companies. Formerly state-run sectors such as Bulgarian utilities are to become privatised under EU legislation, which also presented private equity prospects.

“Energy distribution will be a big future theme. Pan-European or global investors will also seek yield in utilities and real estate.”

Siller also predicts the development of local stock exchanges as liquidity increases and more IPOs are offered. The exchanges would take time to reach a point of critical mass, he added.

The countries are in a very early stage of development, and Siller expects ongoing strong foreign investment and capital growth, he said.

Stan Pearson, head of European Equities at Standard Life, said he is exploring penetration into central and Eastern Europe banking, oil, building and telecom sectors.

The expansion of the EU further into central and eastern Europe and subsequent liberalisation of markets presented investment opportunities and challenges, he noted.

Bernard Moody, global emerging markets fund of fund manager at Progressive Asset Management, said Bulgaria and Romania remained on the fringes of emerging markets, despite the EU introduction.

Markets in the countries were difficult to access, although funds involved in commercial and residential real estate were of interest, he said.

Russian holdings were his top Eastern Europe asset allocation, while Asian emerging markets held more opportunity.

Meanwhile, Turkey and Croatia are expected to be the next countries to join the EU although negotiations for Turkey’s entry stalled in December following conflict with Greece.

Source: Investment Week

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