Where would you invest now?

October 24, 2008

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.”


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It’s time to invest in canned good mfgs. and water hedge funds! :) have a nice day :)

Posted by Jim | Report as abusive

Invest in local communities. Wall Street is not the only place to turn a profit.

Posted by jason | Report as abusive

Just my own phenomenal experience. Wall Street has never been the place to gain long term wealth. I learned that in the 60’s. Wall Street reminds me of a Slot Machine that keeps paying and loosing. Comparison: As a young man I invested an equal amount with a Private Fund who has ALWAYS done better than the DOW over 30 years (no other Fund has ever achieved that type of return to my knowledge}, and the other half in a Personal Real Estate (R) and fixed term Investments (F). Between the two: My Personal “F” has outgrown “R” 80 to 1. In other words stocks are not the answer for 90% of the people; they only hope to do as well as the other 10% (the dream)
And you can’t compare Warren Buffet investments because he obtains special deals that no one else can get, such as a 10% return on a convertible bond set at an easy attainable stock price. If your thinking you can make the same return as Warren, you need to go to a school in finance.

Posted by ddavid | Report as abusive

Cash is king. If you’re of a really nervous disposition (believing in the possibility of sovereign bankruptcies) put it under the mattress. Otherwise invest up to somewhere below the limit of government guarantees. Wait till there are no longer any really negative indicators – that could well be some time in 2010 or 2011 (forget what the stock market’s doing unless you have very big cojones) then dive in, double your money in a few months and retire. Sorted!

Posted by Matthew | Report as abusive

time to invest in stem cell reserch

Posted by nitzie | Report as abusive