Central and eastern Europe's stock exchanges are on a bull run. In the first three months of this year prices at the Warsaw Stock Exchange (WSE) shot up by 50% and Budapest registered a similar rise. Prague's surge of 12.8% was more modest and dwarfed by the performance of the admittedly smaller Bratislava Stock Exchange, where SAX index shot up by 38% in the first two months of the year.
The rises are part of a global trend spearheaded by fund managers, notably those from the US, to move into emerging markets this year. "Emerging markets were bad last year and fund managers lost their confidence," says Ian Kennedy, head of emerging markets and equities sales at Nomura International in London. "This year they are more positive and are allocating money throughout the various markets, though central and eastern Europe has the lowest p/e ratios."
As of March, p/e ratios averaged 7.6 in Hungary, 7.4 in Warsaw, 8.8 in Prague and 5.4 in Bratislava. Compare this with Singapore (22), Thailand (18.1), Philippines (16.5) and Malaysia (21). Market capitalization as a proportion of GDP is 23% in the Czech Republic and a mere 5% in Poland and Hungary, still tiny compared that with emerging market countries in south-east Asia, such as Thailand (85%) and Malaysia (265%).