EU enlargement prospects drive investors’ to the Balkans, East Capital

The Balkans have been neglected and undervalued but the region has lately attracted growing interest, with new appetite for funds investing in the Balkans, according to Peter Elam Håkansson, chairman and head of public equity investment team at East Capital.

According to Elam Håkansson, the Croatian market seems to have already reaped some benefits of its accession to the EU due to take place this summer, with a strong start to the year.

Croatia will become a member of the EU in the middle of 2013, and this process is drawing investors’ attention to one of the strongest drivers of growth for countries in Eastern European: EU enlargement.

“If you take a look at the best markets in Eastern Europe, you will find that the top five are all in the Balkans,” he said.

The best performing market was in Bulgaria, which has gone up by as much as 18.9% in dollar terms since the beginning of the year.

The stock market in Romania has also been strong and has risen by 14%, followed by the markets in Serbia, Croatia and Greece, which increased by 12.6%, 12.5% and 11.5% respectively.

So, what has created this new interest? According to East Capital, one key factor is the concern over Greece possibly leaving the Euro zone has let up.

“Greek companies have considerable interests in the Balkans, and the combination of economic turbulence and a financially crippled Greece has affected the rest of the Balkans,” Elam Håkansson said.

Turkey is also a part of the Balkans and its economy has exhibited incredibly strong growth in recent years. In 2012, the Turkish market grew by more than 60% and the country’s economy has achieved investment grade status, which opens up its bond market to more participants, and has brought down inflation and interest rates below 10%.

“It is very interesting to see the forces that are being set in motion as rates settle down in this range for the long term, which enables the mortgage market to grow and means that young people who move away from home can afford to buy a house with reasonable levels of financing,” he said.

Even if it may seem surprising that countries still want to join the EU, for many countries the union is represents a strong growth symbol.

“Latvia is aiming to join the EMU as soon as the beginning of next year, with Lithuania to follow as soon as possible, proving yet again that the idea of Europe is still strong,” he said.

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