Transition bets

The political and economic transformation of Central and Eastern Europe is not exactly a smooth process. Although the eight former Warsaw Pact countries that joined the European Union this year are enjoying an economic and stock market boom, the tense standoff over the disputed presidential election in Ukraine offers a timely reminder that the process of reform can go backward as well as forward.

When it comes to offering both risk and reward, few places can match Russia. The country's oil-fueled economy has triggered an unprecedented consumer spending binge. In "Haute Times in Moscow" (page 40), Contributing Editor Jonathan Kandell relates how Russians, despite having very modest incomes, are able to splurge on everything from the latest fashions to appliances to mobile phones.

Business executives and investors are seeking to capitalize on this consumer boom, and therein lies the risk. Kandell highlights a dispute over ownership of the country's No. 3 mobile operator, OJSC MegaFon, that pits one of Russia's oligarchs, Alfa Group chairman Mikhail Fridman, against an investment firm founded by the country's Telecommunications minister, Leonid Reiman. With many Russians fearing a return of state authoritarianism, investors will be looking to the resolution of this dispute for clues on whether the business climate is improving or getting riskier.

Getting an accurate read on risk -- whether it's the possibility of a political showdown in Moscow or the potential ramifications of a corporate meltdown in Singapore -- is critical to investors. For insights they turn to the work of global equity research analysts. These researchers, whose work we highlight in the 2004 Global Research Team, beginning on page 65, are enjoying something of a renaissance. In high demand during the heady days of globalization in the late 1990s, their ranks were slashed starting a couple of years ago as the bear market and regulatory crackdowns led brokerage firms to cut their global research budgets and lay off staff. No longer. Major institutional investors increasingly want to put their money into the best companies in the world, regardless of domicile, and they're once again looking for Wall Street's help in identifying those opportunities. For the analysts, it's a nice reversal of fortune.