Pimco Leads Rush to Invest in Eastern Europe

Wednesday, 03 Mar 2010 03:12 PM

By Dan Weil

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Pimco and other major investors are devoting money to Eastern Europe, as woes in Greece and other countries in Southern Europe have them looking for safer alternatives.

The MSCI EM Eastern Europe stock index stands at its cheapest level compared to the MSCI World Index in seven months, Bloomberg reports.

And Eastern European bond yields carry the largest premium over U.S. Treasury yields in two months.

Hungary was the first European Union member that the IMF bailed out during the financial crisis. But now it has slashed its budget deficit 50 percent from the 2006 level.

Investors have been so panicked by the Greek crisis that they have thrown out the baby with the bathwater.

“We’ve seen the first wave of contagion in which the market was non-discriminating,” Agnes Belaisch, an emerging market strategist at Threadneedle Asset Management, told Bloomberg. “The second wave, which is happening already, is differentiation.”

Pimco says it has increased its Polish bond position, and HSBC calls Hungary stocks a “buying opportunity,” Bloomberg reports.

Russian, Turk and Czech bonds are attractive because their debt levels will total about one third those of Greece and Italy by next year, according to Credit Agricole Cheuvreux.

Brazil is another emerging market drawing investors.

“For the first time in recent memory, Brazil is actually not crippled by a global shock and is able to stimulate its economy through this cycle,” Timothy Morris, emerging markets portfolio manager with JPMorgan Chase, told the Toronto Star.



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