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Some of the more attractive regions around the globe in terms of potential investment profits are emanating out of Eastern Europe. As this region continues its privatizations; free-market reforms, strong consumer sentiment, expanding trade with Asia and ever increasing incomes combined with the declining U.S. dollar renders this global hotspot very enticing for investors. The region continues to see impressive foreign direct investment. In 2006 over $112 billion was routed to this area of the globe.

Just consider what has been occurring in Bulgaria and Romania. In the 1990s these countries saw virtually no direct investment, but, based on 2006’s figures, they received over $62 billion in foreign direct investment—which represents a whopping increase over the past decade just as they are ready to enter the European Union. In addition, other nations like Poland, Hungary and Czech Republic are seeing large inflow of foreign funds as well.

The primary catalyst behind these new emerging markets is their entry into the European Union. This provided an environment for economic growth and accelerated the drive to capitalism. This has investors very excited as plenty of growth and profits are anticipated to follow. Basically the change from centrally planned to market economies has released an entrepreneurial energy that has been waiting a long time to manifest itself.

Russia is still the largest market for foreign investments when looking at the Eastern European region. The reason behind this is because Russia is by far the strongest economy. Russia’s Gross Domestic Product increased an average of 7.5 percent per year for the last eight years. In addition, the nation’s once large debts have been replaced with a $150-billion stabilization fund. Their trade balance shows a big surplus of $72.5 billion and its benchmark RTS stock index has increased by 1,992 percent since 2000.

Even with this growth most analysts assert that Russian stocks are still cheap and the cheapest of any emerging market. Currently Russian companies are trading at an average of just nine times forward earnings. This is a bargain when compared to the 14 times forward earnings of Latin American and 15 times forward earnings of Asian stocks or the 20 times forward earnings of U.S. equities.

Russia has always been known for its abundance of natural resources. They have the world’s largest natural gas reserves, the second largest coal reserves and the eighth-largest oil reserves. However, Russia is currently in the process of transitioning from an economy focused just on natural resources to an economy based on domestic consumption because of the big increases in disposable income. The bottom line is that these emerging markets in Eastern Europe, led by Russia, are worthy of taking a closer look at for profitable opportunities.     

Happy Trading.


Jeff Neal 
Senior Writer, Options Strategist & Profit Strategies Radio Show Market Correspondent
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Listen to Jeff at www.ProfitStrategiesRadio.com

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