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Poland becomes the favourite

In the past six months international investors have differentiated central and eastern European countries they once grouped together. Economic performance and market development have varied widely, partly reflecting how badly each country was hit by the Russian crisis. The gap between the richest and poorest is growing, and there is increasing polarization between the first wave of applicants to the EU (Poland, Hungary, Czech Republic, Estonia, Slovenia), the second (Bulgaria, Romania, Slovak Republic, Lithuania, Latvia), and the former Soviet republics. Rebecca Bream reports on Poland, a leader in attracting foreign interest.

couldn't be more

International investors in eastern European debt and equity are increasingly analyzing specific countries rather than grouping all the region's emerging economies together. "Market performance varies widely, and investors are starting to differentiate between countries," says Todd Berman, head of emerging market coverage at Salomon Smith Barney. The first group of EU applicants are being favoured by investors looking for convergence trades, now that easy Emu convergence trades in western Europe have become a fond memory. This new level of discernment may well diminish losses in future emerging-market shocks.

Even within the first wave of EU applicants, a variety of political and economic forces are at work. Hungary has for some years enjoyed stable growth conditions and most of its main industries are now private-sector dominated. The Czech Republic, on the other hand, is failing to pull itself out of recession. It has ceased to be the main beneficiary of foreign direct investment in the region and its privatization programme has hit several problems.

The big winner, and the battleground for foreign strategic and portfolio investors, is Poland.

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