Getting In On Europe's Hot Tech Action

Some markets are more foreigner-friendly than others

The Continent's fledgling high-tech stock exchanges, windows on Europe's emerging New Economy, seem irresistible these days. Germany's Neuer Markt, which has the biggest market capitalization of any of them, has risen 78% since the beginning of the year. France's Nouveau Marche has surged 137%; Italy's Nuovo Mercato is up 132%, and Switzerland's SWX New Market had advanced 111%.

But so far it's mostly domestic investors who are buying into these new markets. In France, for example, the number of foreigners investing in the Nouveau Marche is "marginal," admits Dominique Leblanc, senior vice-president of SBF Paris Bourse. But he and others are counting on that changing.

Indeed, the euro does reduce the currency risk that usually comes with cross-border investing. And the growing number of online brokers certainly makes investing abroad look easier. All the same, investors face some surprising obstacles when they try to get into foreign markets.

NEW ALLIANCE. First, of course, the euro isn't accepted everywhere. Switzerland and Britain, for instance, still require investors to use the local currencies. What's more, even if you are living and investing in countries that have adopted the euro, you'll end up paying nearly twice as much to buy stocks abroad.

Brokers say they charge more because they have to use intermediaries to execute foreign trades and maintain accounts. At the same time, learning about hot new stocks can be difficult. The investment banks that arrange high-technology initial public offerings promote them heavily at home, but they don't spend much time marketing them to individual investors abroad.

And useful information about already listed companies can sometimes be tricky to obtain. Nouveau Marche companies, for example, present audited results just twice a year. In the intervening quarters, they are required to report only revenue figures. Nor do they have to publish their results in English--though about a third do. Leblanc says that by August, companies will have to provide quarterly reports, publish in English as well as French, and adopt international accounting standards.

Most other markets are already more foreigner-friendly. In fact, both the Neuer Markt and the SWX NM actually require more disclosure than their parent exchanges. Companies must report quarterly in both German and English and do so according to international accounting standards.

An alliance of five new exchanges--in Belgium, France, Germany, Holland, and Italy--called Euro.NM is also trying to simplify cross-border investing. Members hope to align their listing, accounting, and disclosure rules within a year.

For now, though, the easiest way to invest in Europe's new markets is to pick a mutual fund that specializes in them. Two strong performers have been Frankfurt's Union Investment Uni Neuer Markt, which is up 415% since its inception in March, 1998, and Bank Julius Baer Special Europe Stock Fund, which is up 410% since its launch 15 months ago.

Uni Neuer Markt's biggest holdings include German infotech companies Intershop Communications and Pixel Park. Baer invests further afield: Tiscali, Italy's hot Internet service provider, and Britain's JSB Software, are among its largest positions.

Trading on the Continent should be pretty straightforward soon enough. But you'll still have to buy British stocks with pounds, not euros, for a while longer.

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