Zee Beam News

19.01.2006 MosNews - Investment bank J.P. Morgan Chase published a report on Wednesday, Jan. 18, saying that investors should favor stocks in the developing nations of Eastern Europe, because profit growth in countries like Russia and Turkey will exceed analysts' estimates. "We are positive overall on emerging European equities," Edward Cole, an emerging market equity strategist at J.P. Morgan in London, wrote in a report that was quoted by Bloomberg agency. "Earnings should surprise to the upside." Fund managers should buy shares of Turkish lenders like Turkiye Is Bankasi on the outlook for falling interest rates in the country, and stocks that may benefit from higher consumer spending in Russia, like Mobile TeleSystems, Cole advised. The emerging market Europe index of Morgan Stanley Capital International covers 91 companies in the Czech Republic, Hungary, Poland, Russia and Turkey. It has climbed 10 percent this year, reaching a record on Jan. 16. The MSCI world index, a global measure, has added just 2.5 percent in 2006. MSCI's emerging Europe index has advanced for four straight years and has outpaced the global measure in each of the last five. The regional measure surged 47 percent last year, following gains of 33 percent in 2004 and 65 percent in 2003. Money managers should have more shares in Turkey than the weighting in indexes, a so-called overweight holding, Cole wrote. Earnings growth in Turkey, which started negotiations to join the European Union in October, may reach 35 percent in 2006, more than the 28 percent predicted by analysts, according to J.P. Morgan. Investors should also have an "overweight" holding in Russian stocks, Cole advised. "The potential for positive earnings surprises is in consumer-oriented sectors," he wrote. "We see the mobile telecoms as a cheap, liquid play on the Russian consumer." Moscow-based Mobile TeleSystems, the largest East European mobile phone company, was on the list of J.P. Morgan's top picks. The shares have climbed 5.7 percent this year. Cole wrote that operating profit in the country would rise 30 percent on average this year, higher than analysts' estimates of 27 percent growth. Citigroup, however, does not share this optimism on Russia. The New York-based analysts Geoffrey Dennis and Andrew Howell downgraded the country last month to "neutral" from "overweight", saying the stock market's surge may overstate earnings prospects.