Turkey might be viewed as punching above its weight when compared with the growth prospects of India, but looked at more closely there's good reason to throw investment dollars into the upstart's corner. For starters, Turkey is the recipient of about the same amount of foreign direct investment as India, although it hasn't enjoyed anywhere near as much publicity, according to Kees Verbass, manager of the Euro364 million ($3.37 billion) Eastern European Equity Fund for ABN Amro. 'There are many oil-rich countries in the Persian Gulf that have extra cash due to rising oil prices and they are either investing directly in the Turkish stock market or routing it through FDIs,' he says. He likes the country's improving economic outlook, adding the investment cycle is just beginning to pick up thanks to falling borrowing rates, declining inflation and growing foreign interest. Another theme is Turkey's emerging status as a destination for euro-convergence investment. Talks over Turkey's membership into the European Union appear to finally be on track judging by developments last week, almost 42 year after the Islamic country first sought to join. The fund now allocates about 10 per cent of its holdings to Turkey, but Mr Verbass says he may add to positions after a pull back. The Istanbul stock market rose to a record high early last week as investors bought stocks and bonds in expectation of interest rate cuts and optimism that EU membership would bolster the economy. 'There is a major opportunity in Eastern European markets and yet, when I was presenting it, I felt that it was a fairly new story for Hong Kong investors,' he said. The son of a Dutch export director with Unilever who did business with Eastern European markets regularly, Mr Verbass got hooked on exotic markets early on. 'What it gave me was an open mind to look at the world, and not have just a domestic focus,' he says. The fund has returned 373 per cent since its inception in June 1995, 56 per cent in the past year and 30 per cent in the year to date. Unlike the MSCI Eastern European Index, which has about 70 per cent exposure to Russia and Turkey, it has a much lower allocation to Russia and has only recently added Turkey to its portfolio. Mr Verbass said the fund also had a significantly higher allocation to Hungary and the Czech Republic, which joined the EU last year, and have been big beneficiaries of what he calls the 'convergence factor' in Central Europe. Not surprisingly then, the fund performance has consistently beaten that of the MSCI Eastern European Index. Russia is offering good consumption led growth, and the most to benefit are consumer goods and mobile phone companies. 'Back in 1993 when I first went to Russia, you couldn't make a direct international phone call from there. You had to book a call two days in advance,' Mr Verbass says. 'But today mobile phone companies are gaining a million new subscribers every month.' Supermarket chains are also gaining from this consumer boom. 'There was a time when there was only one supermarket in the whole of St Petersburg - people had never seen a banana. But today, a big supermarket chain is planning to open 500 new stores over the next few years.' Hungary and Czechoslovakia are big beneficiaries of the outsourcing story, which is a key driver of growth in several emerging markets. Add to this their entry into the EU, low inflation, low interest rates and rising productivity, and these markets look set for solid growth. 'It creates jobs and is good for tax income for the government,' he says, adding the trend appears to be picking up pace throughout the fomerEastern bloc. He added new ideas and western-style management were key to fostering the rise of a new middle class.