Personal Finance: The lure of cheap markets

While most investors will view the Asian economies with caution, and as a potential menace to world stock markets, some may be inclined to see the Far East as a bargain basement. If this is applies to you, then beware.

Richard Urwin, head of research at Gartmore, warns: "In straight valuation terms many Asian markets look cheap. They look cheap on historic earnings. [Their prices relative to earnings] are quite low at present but we think you're going to see substantial declines in earnings in a number of [Far Eastern] countries and the potentially attractive valuations you're looking at are spurious in reality."

Of course, buying into Far Eastern markets when they reach rock bottom could offer huge returns, but knowing when the markets have bottomed is the million dollar question; nobody has the answer yet.

Emerging markets elsewhere may offer a better bet if you want to risk some money for possible high returns. Latin America is a favourite among experts. One economist suggests that the lack of research in certain areas of Latin America might mean that gains there have yet to be anticipated.

Investors should be careful in 1998, and should do their best to avoid the problems of Asia. Tigers are camouflaged - it gives them an element of surprise. Investors for 1998 should act carefully, if they want to avoid surprises. If they do so they could see reasonable returns.