TV Geek Speak

Year 2009 was a good year for investors in emerging markets. Since the low of Nov. 20, 2008, the MSCI Barra index for emerging markets has risen by 84%. Share prices in Brazil, Russia, India and China and the BRIC countries are more than 93%.

Off late, the ongoing actions in Eastern Europe are growing and trying to reach to other emerging markets. In the last three months, the MSCI Barra Eastern Europe (excluding Russia) Index has risen by 28%. This figure exceeds 18% and 20% had earnings per shares in emerging markets and BRIC countries, respectively.

And, as emerging markets continue to reap benefits, urges investors to U.S. invest abroad are becoming stronger. The underlying reason is that the prospects for economic growth in these markets are larger than the U.S. and markets can be protected from the credit crisis.

However, before plunking of dollars in emerging markets investors should be careful that the problems facing emerging economies vary considerably from one country to another. While some emerging countries are ready for further strong growth is not ... at least not in the short term. And in some cases, emerging economies are facing similar problems afflicting the economy U.S..

Eastern Europe

Take the case of Czech, Hungary and Poland. This is a reading of the economic situation in these Eastern European countries.

Czech. The global recession that hit the Czech hard enough. Declining demand due to industrial production above 12% for the 12 months ended June The Czech National Bank expects contact with 3.8% of GDP in 2009 and grow only 0.7% in 2010.

The Hungarian economy. Hungary has been particularly affected by the global financial crisis. Hungary has taken almost 30 million dollars in emergency loans to avoid default. The Hungarian government envisages a GDP contraction of 6.7% in 2009. The economy Hungary is expected to grow again in 2011.

Poland. The Polish economy has a reasonable chance of avoiding a recession in 2009. After to grow at an annual rate of 0.8% in 2009 in the first quarter, the Polish economy seems a bit shaky. The Polish government expects growth of GDP 2009 0.2%. Growth in 2010 is expected to accelerate slightly to 0.5% only.

Compare the picture above, with China and India. The economy China should grow by 8% in 2009. Ministry of Finance of India believes that economic growth in 2009 will exceed 6%, even in the worst case.

Clearly, Eastern Europe is not in the same league as China and India since the growth prospects in the short-term move.

It's Europe Buy one, sell or hold?

While economic growth is not the only factor that determines the behavior of stock prices, investors need to recognize that the ability of firms to increase their income in savings contracting is limited. Cost cutting can only go so far and revenue growth for many enterprises in these economies will be difficult to achieve. This will put a limit on the evaluation measure how high it can go.

The global confinement has lifted all actions, including Eastern Europe. Closed-end funds with significant exposure in Eastern Europe, Europe Central and Russia Fund (CEE) and Morgan Stanley Eastern Europe Fund (RNE) increased 24% and 22% respectively over the last three months.

Open mutual funds Metzler-Payden European Emerging Markets (MPYMX) increased from 25% a little better.

Central European shares Media Enterprises (CETV), a TV operator in Eastern Europe, and Central European Distribution Corporation shares (CEDC), a distributor of alcoholic beverages in this region, each up more than 32%.

The investors have fled emerging markets exclusively to their growth prospects and the "immunity" of the credit crisis is likely be disappointed if they chose Europe as a destination for their money. Given the lack of exciting growth prospects in the short term in this region, Investors sitting on fat profits here is prudent, at least partially in cash from its chips.

Sam Subramanian PhD, MBA edits the AlphaProfit Sector Investors' Newsletter, ten times winner of Hulbert Financial's #1 rank. The investment newsletter offers recommendations on no load mutual funds managed by Fidelity Investments.

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