Schroders turns to Emerging Europe for superior returns

Anna Fedorova

Schroders sees compelling investment opportunities in Emerging Europe, which has remained strong in the face of the Eurozone crisis.

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In Europe, Austria is particularly bullish on the region, having recently set up an initiative to encourage local companies to invest there. The project, dubbed 21st Austria, is driven by 20 prominent Austrian public companies, together with the Austrian National Bank and the Vienna Stock Exchange.

The primary factor making the region attractive is the robust growth expected in the next few years. By 2016, the growth rate is forecasted to reach 20%. This is more than double the expected figure in continental Europe (8%) and well above the 15% expected in the US.

ING IM notes that equity valuations across the region remain attractive compared to global and emerging market peers, although markets remain below the pre-crisis levels when compared to global emerging markets.

Commenting on the outlook for Emerging Europe, Schroders’ Conway said it is “positive on a stand-alone basis.”

He says: “Valuations are attractive, trading on around 6.5 times price-earnings ratio and a 60% discount to their global emerging markets peers. Government, corporate and household balance sheets and their fiscal position are generally strong, especially when compared to the developed world.”

Among managers bullish on the region is also RBC Wealth Management, which recently hired two directors to its London-based Eastern Europe desk. Tanya Blazhko and Nathalie Gorshkova have joined to drive the firm’s expansion into the Eastern European markets.

Mike Moodie, head of RBC Wealth Management-UK, said: “We established the Eastern Europe desk almost a year ago in order to channel our expertise and suite of solutions for high net worth individuals in those markets. [The new] appointments are proof of a commitment to deepening our coverage of both developed and emerging markets.”

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