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&#39Investors must heed emerging market volatility&#39

The AITC is warning investors to be aware of volatility in investments in emerging markets, stressing the need to take a long-term view.

It gives the example of the Eastern European trust, which is the fourth-best-performing investment trust over the last year. Investing £1,000 would have returned £1,170 over 12 months to December 2002 but £670 over five years.

The Baring Emerging Europe trust would have returned £1,255 in 2002 and £2,060 over five years.

Baring says most companies in Central Europe have restructured and some are majority-owned by international firms. On the whole, it believes they offer relatively high cashflows and dividend yields while growth forecasts are higher than expected in Western Europe AITC communications director Annabel Brodie-Smith says: “As the FTSE 100 continues its stomach-churning ride, investors are looking enviously towards recent strongly performing asset classes such as property and bonds. But they must remember it is key to have a balanced portfolio.

“Equity investments are for the long term and past performance is just one of the important criteria to consider before you make an investment.”

Eastern European trust co-manager John-Paul Smith says: “We are optimistic about prospects but would caution that careful stockpicking will be the key to success following the region&#39s near 100 per cent outperformance of the MSCI world index since the end of 1999.”

Baring Emerging Europe manager Klaus Bockstaller says: “Eastern Europe has outperformed because of significant restructuring on the micro and macro levels in recent years. Currencies are competitive and labour markets are more flexible relative to developed countries like Germany.”


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