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Investment view

In markets such as those we have been experiencing in this country over recent weeks, investors must be tempted to cast their net further to see if there are value-enhancing strategies available elsewhere.

It was with such a thought in mind that I attended a lunch at which I learned about one major investment house&#39s approach to emerging markets. The house was Baring Asset Management and the fund was Baring Emerging Europe, an investment trust. It is, as the name suggests, focused on European emerging markets but the lunch was nonetheless interesting for being geographically constrained.

The case for emerging markets has remained pretty much unchanged since Dr Mark Mobius first brought some of the more exotic corners of the investment world to the attention of investors. The tendency is for lesser developed countries to play catch-up with their wealthier neighbours, even if Latin America is experiencing more than its fair share of problems. The fact is that they, along with South-east Asia and Eastern Europe, have aspirations to become better off and, although the path is by no means smooth, progress will undoubtedly be made.

In South-east Asia, the Japanese sun is being eclipsed by China. Interestingly, it is China that might give impetus to some of the investments within Baring Emerging Europe.

The Baring boys find Russia an exciting prospect. Those who have attended any of the seminars at which I was speaking last year know that, among the slides I have used to depict the vagaries of international investment, was one demonstrating that Russia outscored them all during 2001 and early 2002. Since then, this market has marked time but when you bear in mind that this compares with equity market losses on a grand scale from most other areas, this is not a bad result.

The fact that Russia was left behind by the West during the last few years of communist rule and saw considerable turmoil as capitalism took hold only serves to demonstrate how much has been achieved in a relatively short period and to highlight the opportunities that undoubtedly exist.

It is the growth of China, though, that could give an extra boost to the resource economy of the former Soviet Union. Oil, minerals, chemicals – all will be needed by this coming super-power with its economic growth that continues to power ahead despite the slowdown in the rest of the world. Russia is geographically well placed to benefit and Baring has around 40 per cent of its assets committed there.

But that is not to say that there are not opportunities elsewhere. Many of the emerging countries of Eastern Europe are queuing up to join the European Union. Convergence will play its part and we can expect a general rise in living standards across a variety of countries, perhaps at a time when the developed part of Europe marks time on the economic front. It is an exciting time for the emerging market investor, which is just as well given the sorry state of our own market.

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