MERCURY Asset Management has launched a fund that aims to capitalise on the recent strong growth in Eastern European markets. The Eastern European Fund is a portfolio of small to medium stocks with a tendency towards manufacturing and cyclicals. About half the fund is invested in Poland, more than 20 per cent in Hungary and more than 10 per cent in the Czech Republic and Slovakia. The markets underwent explosive growth in 1993 but have foundered during the past two years. In the past six months the economies have generally been emerging from recession. The asset value of the fund has risen 31 per cent since its December launch. Stephen Cohen, managing director of offshore funds, said the stocks were cheaper than in Southeast Asia on a price-earnings and price-to-book basis. Mr Cohen said he expected growth rates to average about 5 per cent a year in the next five years.