Hot spots that need a lot of bottle

Investment tourists: Ken Welsby weighs up the prospects in Greece, Turkey and the Levant

"Don't drink the water" is common advice to those heading for countries such as Turkey and Greece. As a health warning it may or may not be justified but it is certainly significant from a business and investment point of view. For when locals and visitors are not drinking the water, they are increasingly turning to the real thing: Coca-Cola. Whether you are waiting for a ferry on the Piraeus waterfront, island-hopping in a gulet or simply soaking up the sunshine on the beach, Coke, its cousins and competitors are almost everywhere to be seen.

While the brand name itself - and, of course, the secret syrup that distinguishes "it" - are controlled by the Coca-Cola corporation of America, production, bottling and distribution are undertaken by local companies in each country or region. While not quite a licence to print money, becoming Coca-Cola's bottler can provide the foundation for a fast-growing business.

Hellenic Bottling is the Coke bottler in Greece and, curiously, Ireland. In recent years Hellenic has also expanded into other countries, such as Bulgaria, Romania and Moldovia, markets with a total population of more than 20 million. Next year it has Serbia and some of the southern Russian regions in its sights. The company, worth more than pounds 1bn and increasing its profits at 20 per cent annually, is the most popular "first pick" for investment fund managers starting to invest in Greece. It gets a firm "buy" recommendation from ING Barings, the stockbroker, despite a recent downturn in the share price amid reports that Pepsi is becoming more aggressive in its marketing.

Investment managers buying such shares are typically doing so for what are called "emerging market" funds - those investing in lesser-developed economies, a range, normally offering the prospect of outsized economic growth and, therefore, outsized investment returns.

In Turkey the Coca-Cola bottler is a local brewery, Erciyaf Biracilik, which has become Coke's "anchor" in Kazakhstan and the central Asia region - extending the distribution network from the shores of the Mediterranean to the foothills of the Himalayas. This, says Radhika Ajmera, head of emerging markets at Abtrust, the fund manager, is not simply an example of global expansion in the soft drinks business but an example of the ways in which Turkish entrepreneurs are playing a leading role in the development of regional trade. Ms Ajmera runs the Turkey Trust, a pounds 25m investment trust, and knows the country well.

"Turkey is emerging as an important regional power, both in geopolitical terms and in business and industrial development," she says, noting that Turkey is seen as a role model by the emerging countries of central Asia - the former republics of the USSR. The economy is growing strongly: gross domestic product growth averaged 5.8 per cent between 1985 and 1990, and was more than 8 per cent last year. Abtrust estimates it will grow at 4 to 5 per cent this year.

It has to be said that Turkey has had a mixed press over the last few years, primarily because of long-running problems with its Kurdish minority and most recently because of a prison hunger strike that led to the death of 11 protestors and concern over the Muslim Refah party's prominence in the coalition government. But Ms Ajmera believes that Turkey, a secular state, is committed to developing its ties with Europe (it concluded a customs link-up with the European Union in January), though she cautions: "It is a volatile market and must be viewed as a long-term prospect."

A much tougher prospect for investors is Lebanon, currently a fashionable destination for independent travellers where reconstruction is now under way after more than a decade of civil war. Reconstruction will take at least the next 10 years and cost pounds 15bn or more. But the Beirut stock market, the oldest exchange in the region, has already reopened on a small scale, dealing in half a dozen company shares and government bonds.

Gabriel Sehnawi, the head of the Beirut exchange's management committee, acknowledges that it will be several years before Lebanese companies form a significant part of London investment managers' portfolios. A small number of investment funds have taken the plunge, investing mainly in bonds or shares in Solidere, the company established to play a lead role in rebuilding the country's shattered infrastructure. But for all but the bravest of investors, analysts say the message must be an emphatic wait and see.

The region's most highly developed stock market is in Israel - hardly surprisingly for a country in which industrial development and personal incomes are close to European levels. A growing number of Israeli companies have their shares traded on the American Nasdaq stock market, the US market for hi-tech hot stocks.

The companies themselves can be found housed in the gleaming glass blocks on the outskirts of Tel Aviv. Others are in anonymous "sheds" near the airport or (reflecting their origins in the defence industries) on the remote roads leading south towards the desert.

One of these, Scitex, readers arguably already have cause to appreciate - it is a world leader in colour printing technology, with a customer base that includes this and almost every other big publisher in Britain.

GREECE is by far the most popular tourist destination in the Eastern Mediterranean. But the country is less popular with investors; most London-based investment funds are not falling over themselves to buy Greek shares, even though the total worth of those available has more than doubled in the last three years.

Like most emerging markets, TURKEY's Istanbul stock exchange is highly volatile. Since it opened in its present form in 1986, it has seen spectacular booms, in 1987 and 1990, and even more spectacular crashes, in 1988 and 1992. There are about 1,200 different shares, but only 200 are bought and sold on a daily basis.

ISRAEL's GDP is growing rapidly, at more than 5.5 per cent a year, fuelled by economic liberalisation, continuing immigration and rising exports. It now exceeds $14,000 per head of population, about level with Spain and Ireland.