EASTERN EUROPEAN COMPANIES

The world's biggest gas company Gazprom leads five Russian energy companies and Rostelecom, the leading Russian telecommunications company, into entering the top 500 companies in the world which had previously only had two Czech companies as the only eastern European members.

The six Russian companies - Gazprom, Lukoil, Unified Energy System, , Mosenergo, Surgetneftegaz, and Rostelecom - join newcomer Komercni Bank, the largest Czech bank, and the two original Czech world top 500 members, SPT Telecom and CEZ, the power company, to raise the east and central European presence in the top 500 companies this year to nine companies.

The number of companies from the former Soviet bloc is set to rise steadily for the next few years as central European companies benefit from high growth rates in the private sector, improved access to domestic and foreign capital and stronger financial markets. The market belief of huge potential continues to attract investors anxious to tap into one of the world's great under-developed economies.

In some Eastern European markets, there is still difficulty in establishing the real value of still largely state-owned companies which operate within outdated political, legal and market frame-works, particularly when the small portion of shares quoted abroad in ADR or GDR form are priced at multiples of trading values on fledgling domestic markets.

Russia, however, with its huge potential and extensive resource base cannot be ignored. Last November, the Russian government's first international bond issue since 1917, a $1bn eurobond, was heavily oversubscribed although yielding only 345 basis points more than US Treasuries. Gazprom's depositary receipts trade in London at four times the price of Gazprom shares on the domestic secondary markets.

Companies from Poland and other central European countries are also benefiting from strong economic growth. Polish companies are currently expanding at a respectable rate. Poland enjoys macroeconomic stability, declining inflation and investors can look forward this year to a new round of privatisation of large companies such as Polska Miedz, the copper combine, Lot, the state airline, and the Polish telecoms company.

A host of progressive measures have also transformed the outlook for Hungarian companies, a perception reflected in share prices. Hungary's BUX stock market index rose 125 per cent in dollar terms last year against 59 per cent for Warsaw's WIG index and only 20 per cent for Prague's PX-50 index.

The Czech Republic has the largest number of big companies in the East European top 50 but is suffering from a relatively slow pace of change within individual companies. There have been a series of bank failures and violations and the government has pledged to take measures to restore confidence this year.

Pliva, the Croatian drug company which last year issued Global Depositary Receipts and became the first central European industrial company to be quoted on the London Stock Exchange , takes 10th place in the 50 top east European companies with a market capitalization of $1.38bn. The capitalization of all other companies on the list is well below $1bn, starting with MOL, the Hungarian oil company with $930m, and Poland's Bank Slaski at $919m. The list ends with Gorazde, the Polish cement company, with a capitalization of only $210m. Pliva is the only Croatian company in a list which includes 15 Czech, 15 Russian, 12 Polish companies, four from Hungary and three from Slovakia.

TOP EASTERN EUROPEAN COMPANIES

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