Go long on tulips

Liam Robb continues our series on the world's stock markets with a tour through Holland, Hong Kong and Hungary

Holland

has traditionally been the most equity-friendly of the Continental European countries. Along with the UK, its privately funded pensions industry is one of the few to have had time to develop.

Pension funds managed per capita are currently the highest in the world; much of this money finds its way into the stock market - the eighth largest in the world. Accordingly, Dutch stocks have had a good run over the past five years - the last 12 months being no exception and, as in much of the rest of Europe, the market has recently reached an all-time high.

The Amsterdam Stock Exchange is, in fact, the oldest exchange in the world; as long as 400 years ago investors were being offered the opportunity to buy shares in cargoes on the route to the East Indies. Nowadays, Royal Dutch, the Anglo-Dutch conglomerate which includes Shell Oil, is the main focus of investors' attention.

Of the other 531 companies listed, big players include Unilever, Philips Electronics, Polygram and Heineken. Growth in is still predicted to be the best in Europe over coming months. Given that the largest rise in consumer expenditure has been in financial savings products and that, if anything, interest rates are likely to rise, Andy Carter from the European desk at Gartmore believes banks like ABN Amro and ING should help the market continue its run of form.

Hong Kong

The countdown is on for Hong Kong's population of six million. On 1 July, Britain's 99-year lease on the New Territories comes to an end. It has not deterred Hong Kong corporations from rushing to raise money - pounds 500m was raised in the first two weeks of this year via share placements and more are expected to follow. Once seen as a potential deterrent to foreign investment, the colony's reversion to Chinese rule is now being viewed with increasing optimism; as China moves, albeit sluggishly, towards a free-market economy, so the country's one billion-strong population is likely to provide rich pickings for a number of Hong Kong-listed industries.

Indeed, many "Red Chips" - companies which have almost exclusive exposure to China - are already listed in Hong Kong. The Hang Seng is the most widely observed index and comprises 33 companies - the largest include HSBC Holdings, Hutchinson Whampoa and HK Telecommunication.

Despite the fact that unemployment is on the rise and that, due to the HK dollar being pegged to the US dollar, interest rates have risen, the 540 companies listed on the world's ninth biggest stock exchange enjoyed a record year last year.

Hungary

Land-locked and bordering seven states, Hungary enjoys the highest standard of living of the former Communist bloc countries - 90 per cent of households have refrigerators, washing machines and TVs. Once suffering from a rigid and centrally planned economy, the privatisation of state companies has been one of the most rapid in the whole of Europe.

Having been closed for the previous 45 years, the Budapest Stock Exchange reopened for business in 1990 and now 60 per cent of turnover is accounted for by foreign investors.

The large-scale denationalisation of Hungarian utilities and banks began in 1995 and 44 companies are currently listed. In the past privatisation has mainly involved selling companies to Western investors for cash. However, the smaller domestic investor is beginning to return to the market and helped the BUX index, comprising the 21 most liquid stocks, to become one of the world's best-performing last year; Sterling returns were in excess of 130 per cent.

Privatisation continues apace. Later in the year, Matav, the state telecoms company which is majority-owned by Deutsche Telekom, makes an initial public offering of around 17 per cent of its stock which should be worth around $500m. Other offerings in the pipeline include a secondary tranche of Magyar Olaj-es Gazipari (Mol) the oil and gas conglomerate and currently the largest company in Hungary.

Numerous investment houses manage funds with exposure to , including Gartmore, Nat West, Barings and Invesco. Jupiter's European unit trust and TR European Growth investment trust have been the best performers over the past year. These houses also run numerous specific Hong Kong funds. Of the 1,500 or so unit trusts available in the UK, HSBC's Hong Kong Growth fund is the best-performing over the past five years. John Govett runs the Hungarian Investment Trust

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