European Stars and Stripes (Newspaper) - April 29, 1990, Darmstadt, Hesse                                Page 18 a a a the stars and stripes sunday april 29,1990mark holds up despite pledge to e. Germany the West German Mark maintained its strength on currency markets last week even in the face of a pledge by the Kohl government to give a 1-for-l Exchange rate for wages pensions and some savings when forging monetary Union with East Germany later this year. At weeks end the Dollar was trading in the neighbourhood of 1.68 Marks on world markets and the military Exchange rate available at Community Bank facilities was set at 1.65 Marks. That rate will remain in Force through monday afternoon. A Dollar Worth 1.64 or 1.65 Marks is old and disappointing news to service members in West Germany who have watched the Buck struggle since late 1989. Still the Marks muscle against the Dollar was surprising in Light of the fact that Many economists and currency Trad n cars have Long argued that a 1-for-l Money Swap  with the East is too generous. The East Mark usual Randy Mcclain by has traded at extremely Low rates against the Deutsch Mark As Little As 12-to-l on the East German Black Market. And the experts say putting too much Cash in the hands of East German citizens could cause the East a product hungry Consumers to go on a dangerous spending spree with their new found wealth when the two Germany get together. If that happens the thinking goes West German manufacturers will be hard pressed to keep Pace with the demand for goods and inflation could Lake off. On monday immediately after the Kohl government unveiled its draft plan the Dollar gained a pfennig against the Mark based largely on traders skittish Ness about the 1-for-l proposal. But the rally did no to last. Currency traders on tuesday and wednesday re evaluated the Outlook for the West German Economy and the Mark gained Back a pfennig and a half. Tim Fox economist with Midland Montagu Bank in London said the Marks resurgence is due to the widespread belief that the West German Central Bank wont allow inflation to get out of hand. Fox said he would expect Strong preemptive strikes by the germans including a hike in National interest rates to rein in inflation. A a it a Clear the Bundesbank will tighten fiscal policy if need be and the markets realize that a agreed Citibank currency analyst Petra Ott in Frankfurt West Germany. The result Ott said is that the Buck will remain pretty much where it is. A we done to expect a major upturn or downturn a she said. In another development the Commerce department reported Friday that the . Gross National product increased by an annual rate of 2.1 percent in the first Quarter of the year. But that news did no to help the Dollar either. Fox said currency traders were expecting an even bigger Gnu number because the most recent . Trade deficit figures had been so Good. The Gnu report did nothing to change the prevailing View that the . Economy is basically sluggish Ott said. The Citibank economist said one of the few things that could help the Buck in the near future is deterioration of the situation in Lithuania. A if the russian tanks Roll in Lithuania it would be positive for the Dollar a Ott said. Anything that increases tension inside the soviet Union tends to drag Down the Mark she said. The Star and strip upward trend forecast for european Mutual funds by Lance Ignon los Angeles times new York a until recently if an East German woman wanted to use birth control pills her Only Choice was a drug that was banned in the West 20 years ago because it was so toxic. That has changed. After the fall of the Berlin Wall Schering a a West Berlin based pharmaceutical company introduced a safer Oral contraceptive to its Eastern neighbors. Women got a better Pill and Scheringa a sales Rose 30 percent. The company a Success is Only one of countless examples of Why .-based Mutual funds Are investing in Western european markets As if they were tourists with unlimited expense accounts. There Are already at least 16 various types of european funds Many of which Are less than a year old with several More on the Way said w. Douglas Dent co editor of Frank Cappiello a closed end fund digest. With the ideological and physical Walls falling Between East and West and the coming of a United marketplace in Western Europe in 1992, investors Are hoping to take advantage of blossoming Cross Border business. This optimism helped boost the performance of european funds into second place last year among All Mutual fund groups trailing Only funds investing in Asia Dent said. A there Are going to be hiccups but the general trend is certainly going to be up a said s. Juliet Cohn european portfolio manager for Klein wort Benson International equity fund. But some experts note that not All funds will be successful. Profitable funds will need to invest in the right countries and companies at the right time. For example until recently West Germany was favored by Many . Mutual funds but several experts now say the German Mutual fund Market is woefully overcrowded. Four so called single country funds a those that invest in stocks of companies from one country Only a already target West Germany and another is on the Way. Furthermore securities prices Are still rising there so fund managers Are casting about for undervalued markets in other parts of Europe. So far investors Are divided Over what country will emerge As the next big Winner. A fall of the countries in Europe will Benefit but pinning it on one sector is difficult a said Christian Wignall chief investment officer for it global funds. Ten single country funds have already blanketed most of Europe from Ireland to Italy and Portugal to Austria. Greece France and a fourth fund for Spain Are coming. Western Europe is also covered by three regional and three global funds with new ones in the making Dent said. But european Mutual funds Are not without risk. Tremendous demand particularly for closed end single country funds sent premiums soaring in the dawning Days of the new year. But the values plummeted in mid january. Closed end funds sell Only a set number of shares to investors and thus the Price of their shares Rise and fall Selling at either a Premium or a discount against the value of their portfolio. Their shares Are sold on Stock exchanges or Over the counter a was far As single country funds that group was very overvalued coming into the term a said Thomas j. Herzfeld a fund Market analyst in Miami. On average if you invested $2,000 in a european single country fund on Jan. 1, it was Worth an extra $248 11 Days later. But by april 6 it was valued at Only $1,676. Several analysts said they re recommending against single country funds precisely because they re so volatile instead they prefer regional or global funds. They also advise that fund managers should pick securities based More on the prospects of an individual company rather than the country from which it originates. A there Are some fund managers who Are just investing Bla Ketly. I done to believe that a the Way to go about it a Cohn said. So what do fund managers have their eyes on Many say the Best bets Are companies that offer services needed in Eastern Europe or that will Benefit from a United european Community. And if the companies Are located in countries with More Liberal economies so much the better. Wignall said he is keen on French hotels and general Des Eaux a French water Utility company that is expanding into telecommunications and pollution control. He is also enthusiastic about a company called Cort Ceira amorim Portugal a largest Cork manufacturer. Cork is a major Industry for Portugal and if Europe continues to Prosper there will be plenty of cause to pop open numerous bottles of Champagne. Cohn said construction companies with Access to rebuilding Eastern Europe Are Good picks too As Are the shipping and transportation industries which will see increased demand to move people and goods across once restricted Borders. Still there Are fund managers eyeing entire regions. Several investors said the Mediterranean countries will do Well because they offer relatively inexpensive labor costs As the european Community Lowers internal barriers to Trade and investment. A fourth single country fund is about to invest in Spain and other upcoming funds Are set to invest in Greece and France. Italy Portugal and even Turkey also have funds. Cohn said Many investors Are Rushing to the Netherlands because of its undervalued Stock Market. And she predicts that despite concerns of inflation in West Germany Many companies there will do Well because of their close proximity to Eastern Europe. Amid All the european euphoria however there will be losers. Prediction of interest rate dip a Plain wrong a expert admits by Nick Poulos Cox news service Atlanta a like most of his Peers economist Robert j. Genetski made what he describes As a a a terrible Call when he tried to predict the direction of interest rates for Early 1990. A regardless of the factors the fact is we were Plain wrong last year forecasting rates would dip in Early 1990,�?� said Genetski president of Stotler economics inc., a Chicago based economic forecasting firm. A i forecast that rates in terms of the Benchmark 30-year Treasury Bond yield would fall to 7.5 percent by the end of the first Quarter of 1990. But they went up instead As the december cold wave pushed up food and Energy prices and Japan and West Germany increased interest rates a he said. Although the Long term Treasury Bond rate has climbed to just under 9 percent Genetski still believes it will fall to under 7 percent by the end of 1990. If he a right buyers of Bonds at prevailing rates will gamer some handsome returns and the economists status As a top rate forecaster will be restored. Genetski won institutional investor magazines top award for making the most accurate year end predictions in the summer of 1988 for four key interest rates including 30-year Treasury Bonds. In the Shorter run Genetski said Long term rates could easily climb into the 9 percent to 9.25 percent Range Over the next couple of months before they turn Down again. A but in View of the fundamentals i done to believe rates should be As High As they Are a he added. A my associate Brian we Bury says Bonds Are the Missouri of the financial markets a they have to be shown by the numbers inflation is actually going Down. A so far this year the inflation numbers have been very bad and this is duly reflected by the Bond Market. But Oil and Gold have been telling us inflation is heading Down. Oil prices for example have totally reversed their upward course of earlier this year.�?�. Genetski asserted that any further Money tightening moves by overseas Central Banks should not markedly affect . Interest rates. A of course there is always the possibility the Federal Reserve could tighten up dramatically if it decides to fight inflation More aggressively. But i done to expect that to happen a he  for fixed mortgages rises to 10.56 percent Washington up a rates on 30-year fixed mortgages increased 0.15 percentage Points to 10.5o percent and adjustable rate mortgages held steady at 8.56 percent last week the Federal Home loan mortgage corp. Said Friday. The fixed rate the previous week was 10.41 percent according to the Agency that buys mortgages from lenders and packages them As  fixed rate average is for a 30-year loan covering 80 percent of a Homes Cost. The average adjustable rate mortgage also is for 30 years but for 75 percent of the Home Price