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Stock Markets Are Looking Good

WESTERN EUROPE AND JAPAN

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BUOYED by economic integration in Europe as Common Market nations prepare for 1992, political liberalization in the East bloc, and generally good economic growth for industrial nations in general, European and major Asian stock markets look promising during the months ahead. Granted, the Paris-based Organization for Economic Cooperation and Development forecasts slower real growth during 1990 for its 24-member countries, about 3 percent, compared with around 3.6 percent this year. But look who is predicted to be out front. The industrial nations of continental Europe are expected to outperform the United States and Britain, the latter two coming in at 2.3 percent and 1.3 percent, respectively, compared with 3.2 percent for West Germany, 3.1 percent for France, and 3.2 percent for Italy. Japan's projected growth rate glows at 4.5 percent.

Thus, it is hardly surprising that investors are turning their attention to overseas markets - especially continental Europe.

A number of international investors, including Japanese life insurance and real estate companies (such as Kumagai Gumi and Kato Kaguku) have recently shifted potential investments away from the US to Europe. Moreover, investment interest in Europe is on the rise in the US. Case in point: Several new or prospective mutual funds are now being targeted at Europe, including the Classic Europe Growth Fund (PaineWebber) and the New Europe Fund (Scudder, Stevens & Clark).

The long-term investment outlook for Europe looks promising, in part because of the changes now occurring in Eastern Europe, says Mark Hays, senior portfolio manager of IDS International Inc., an investment management company based in London.

``We're feeling particularly bullish about France,'' Mr. Hays says, noting that with relatively high interest rates there, ``you've got the potential for bond yields to fall.'' That tends to work in favor of stocks, Hays notes. ``France also has a very entrepreneurial economy, with a great interest in equities.''

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