Russia and Central Europe have been identified by fund managers as offering the best investment opportunities in emerging Europe at present.

In contrast, many are steering clear of Romania, Bulgaria and Turkey. One of the main reasons for this is politics.

"Politics in Central Europe is a bit of a non-event," says Elena Shaftan, head of Jupiter's emerging Europe equity team. "Politicians may come and go but their policies are all very similar. They are all bound by their commitment to the EU."

Russia also looks set to remain stable when Vladimir Putin steps down next year. "I don't think it will be a messy handover," says Chowdhry, head of emerging market equities at F&C. "Gradually Putin will step aside but it's not going to be a market-moving event."

Turkey presents a different picture. Jupiter has scaled down its Turkey exposure to 5% and Shaftan notes that although the country has made progress under the last government, the July elections look likely to produce a coalition rather than single government which he says will make reforms harder to achieve. Chowdhry agrees: "Our view is that the Turkish market is going to be volatile over the next few months."

Politics aside, domestic liquidity, which is accelerating in Russia, is also of prime importance. According to Chowdhry, this is because of the large amounts of money being brought in because of the high oil price. "Consumer disposable income is growing quite rapidly so we are particularly keen on the Russian retail sector," says Chowdhry. Although Russia has had a seven-year bull run, Shaftan still considers it to be one of the cheapest markets.

Domestic liquidity in central Europe, particularly Poland, is also looking promising. "Polish retail sales in March are up 90% compared to last year while car sales have been growing by 20% every month," says Shaftan.

Neither is there a problem of skilled labour force leaving the country. Instead, many are returning. Roughly 2% of the GDP comes from those who have worked abroad and are returning to their home country. "The difference in wages has been reduced enormously and housing is still much cheaper back home," says Shaftan.

Chowdhry is similarly enamoured of Poland. He says: "The economy is growing rapidly and people are moving money into mutual funds which then finds its way onto the equity market. Most foreigners underweight that market but we think valuations will continue to be high."

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