Eastern Europe sparkles as global bourses slide.

(From FT Investor (Stories))

The world's major stock markets may have had a torrid year, but there have been some bright spots in more obscure corners of the globe.

One of the most sparkling last year was eastern Europe, where both Russia's RTS Index and Prague's PX 50 produced returns of 38 per cent in dollar-adjusted terms in 2002.

Fund managers specialising in the region are confident that the fundamentals remain strong, despite sluggish global economic growth and the growing threat of war.

John-Paul Smith, manager of the GBP65m Eastern European Trust, says: "We are optimistic about the prospects for European emerging markets where, overall, valuations appear inexpensive. We have few reservations about the economic outlook for Russia where, if anything, the pace of reform is actually picking up."

The region splits neatly into two, with the dynamics of Russia very different to the European Union-bound nations to its west.

Russia is continuing its march back to financial respectability following the debt crisis of 1998, when the nation …