Baring cuts back on emerging Europe banks

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The credit crunch is making banks in emerging Europe less attractive although they have limited exposure to global financial stress, Baring Asset Management said on Tuesday.

Martin Majdaniuk, who runs the roughly $800 million Baring Emerging Europe Investment Trust, told Reuters he had been cutting back on holdings in the region’s banks and they now comprised only about 16% of the portfolio. Exposure had been reduced over the past six to 12 months, he said.

Majdaniuk earlier told a briefing at the Association of Investment Trusts, that emerging banks had no specific problems relating to the credit crisis beyond those that rippled through from the global squeeze. “Emerging Europe is to a very large extent an underbanked region,” he said. When the credit crisis started last year, Majdaniuk found that not one of his holdings in emerging Europe had exposure outside their specific countries.

The cost of financing, however, was rising as a result of the crisis. “They have to seek funds externally,” he said. “The money is there (but) at a higher cost.” Majdaniuk told Reuters he was currently focusing on banks in countries, such as Russia and Poland that were relatively strong economically as opposed to the most fragile economies such as Hungary and Turkey. (Reuters)

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