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Investors: Bulgaria set to outpace Hungary, Poland

Date: 24.11.2005

Investors are turning to Bulgaria, Romania and Croatia in expectance of their forthcoming EU entry, but some remain skeptical due to poor management and vulnerability to foreign competitors, according to the Bloomberg agency.

"We have to move further east in order to keep our returns,'' says Thomas Farthofer, who manages his USD 200 M fund at Bank Fuer Arbeit und Wirtschaft AG in Vienna.

"Investors such as Farthofer say economic growth in Romania, Croatia and Bulgaria is set to outpace former stars such as Hungary and Poland, which joined the European Union in May 2004. The EU, the world's largest trading bloc, is targeting membership for Romania and Bulgaria by 2007 and Croatia by 2009. Joining the EU would boost local economies and stock markets as trade barriers fall and travel restrictions are eased."

Bloomberg points out that Romania's BET Index has almost tripled since January 2004. Croatia's Crobex has advanced 30 percent in 2005, heading for its seventh straight year of gains, while Bulgaria's Sofix index has added 33 percent, paced by drugmaker Sopharma AD.

The agency warns that some investors remain skeptical about prospects for Romania, Croatia and Bulgaria. According to Matthias Siller, who manages about 1.2 billion euros of eastern European stocks at Raiffeisen Capital Management in Vienna, many companies in those countries are expensive given poor management and their vulnerability to foreign competitors.

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