Where would you invest now?
Global markets are tanking, investors are hoarding cash and the financial crisis has hit central and Eastern Europe. Where do you run when the world is on fire?
We asked that very question — or a watered-down version of it, at least — to the executives and policymakers at this week’s Reuters Central European Investment Summit in Vienna.
The question was this: “If you had 10 million euros of your own money and had to invest it in any one thing in the region, from a small business to an asset fund, what would you do?”
I expected our Hungarian speaker, deputy central bank Governor Ferenc Karvalits, to give the question more thought.
After the huge selloff in Hungary’s debt, currency and stock markets this month, mainly due to concerns over the health of the country’s banking sector, including the largest bank OTP, I thought he would be hard pressed to think of a good investment.
But he didn’t hestiate.
“OTP,” he said. “Either that or contemporary art. Even though I heard the run on artwork has slowed.”
He wasn’t alone.
Despite the almost complete collapse of stock markets across the region — OTP itself was down 57 percent on Friday compared with Oct. 2 — All of our guests said the panic selling by mostly foreign investors was ignoring fundamentals.
“All the share prices in central and Eastern Europe are cheap; you cannot be completely wrong to invest in any of the companies in the region,” said Wolfgang Ruttenstorfer, head of Austrian oil and gas firm OMV.
It’s been a bad month for the region, and investors have been dumping assets ever since Iceland flirted with economic collapse, fearing other countries could follow.
The forint has fallen at least 15 percent. The Polish zloty is close behind. Stock markets across the region have fallen 30-40 percent since the start of October.
But those who know the region best said they weren’t worried by a little panic among foreign investors. Where traders in London and New York see risk, they saw opporunity.
“Some of the assets are looking increadibly discounted and I would imagine if they are not at the lowest of the low, they certainly look really attractive on the price,” said Mariusz Grendowicz, head of Commerzbank unit BRE in Poland.
“Whether it is the moment to buy, I don’t know. Looking at that, I would look very actively at some of the Russian assets because after a freefall on the stock market there I would imagine there are some very interesting pickings.”
Billionaire investor Warren Buffet has said he is “buying American” — a bet that fire-sale prices will pay off in the long run for U.S. firms that have good products and plenty of growth potential in a normally-functioning economy.
But the question people are asking here in emerging Europe is who will be brave enough to jump back into these plummeting markets. Or whether anyone takes any investment pick seriously when the market has ravaged even the most pessimistic scenarios.
“At this moment, I would say Iceland is a lovely country to invest in,” Czech deputy central bank Governor Miroslav Singer said with a wide grin. “It’s just (near enough) to the point of bankruptcy to give you some return.”