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Published on October 10, 2007

The gist is that these companies, particularly Austrian and German, invest in Eastern Europe too but they also adhere to stricter financial reporting and listing requirements and regulations, said Tom Hooper, fund manger for Aberdeen Asset's Pan European Equities Fund.

"There is more transparency and better governance," added Ratanawan Saengkitikomol, assistant fund manager who looks after the local Aberdeen European Growth Fund, which feeds capital into the UK master fund.

Hooper said that with the unemployment rate going down and exports going up, confidence among investors and consumers was strengthening, with less dependency on the US economy and more business with new EU members. The economic outlook is "attractive".

Quoting last year's data from FactSet, Hooper pointed out that Europe and the UK, although no match for Asia's high P/E ratio, have ROE of 17.3 and 20.1 respectively, whereas Asia except Japan is at 13.5.

Their dividend ratios also lead Asia and other emerging markets at 2.9 and 3.3 respectively.

The fund diversifies their holdings in various blue-chip European companies: Germany's Commerzbank, BNP Paribas, British American Tobacco and Italian bank Intesa SanPaolo.

Yes, it is the BNP Paribas that froze 1.5 billion euros (Bt66 billion) two months ago because of its sub-prime exposure. And 2.08 per cent of the ¤125.5-million fund can also be found in the Swiss bank UBS, which has wound up its hedge fund arm Dillon Read Capital Management which cost US$300 million (Bt10.2 billion) in reintegration, also because of sub-prime exposure.

"The exposures are not material," said Hooper.

"They are merely blips in stock price. After all, the Swiss bank has written off the loss and moved on, while BNP Paribas has become more cautious in its lending."

Other stocks, such as Britain's third-largest grocer Sainsbury's and chemical company ICI, look impressive, said Hooper.

Ki Nan Tsui

 The Nation