(A digest of investment opinion from the world's leading financial advisers)

Unfortunately, the lack of American Depositary Receipts (ADRs), or mutual funds that invest in small, regional overseas markets, remains a problem, says Personal Finance newsletter (PF).

"Basically, Wall Street still wants U.S. investors to buy only U.S. stocks. This situation is changing, but very slowly, and it will be many years before the playing field is completely leveled."

To hasten that day, Personal Finance recently listed its two favorite emerging markets and its favorite individual investments in each:

EASTERN EUROPE. The expansion of the European Union and the flow of institutional money into Eastern European markets has created a boom, as 15 years of economic reforms finally start to pay off.

Personal Finance's favorite way to participate in this trend is through the closed-end Central Europe and Russia Fund. It formerly focused solely on Eastern Europe, but last year it decided to include a major Russian component. Currently, its portfolio is invested 39 percent in Russia, 23 percent in Poland, 10 percent in Hungary and 16 percent in Turkey, with the remainder scattered through the rest of Eastern Europe. This fund holds many of the region's top blue chips in the energy, telecom and financial services sector and is an excellent proxy for macroeconomic improvement throughout the region, says PF.

"It recently traded at a discount of 7 percent to the value of its holdings despite excellent returns over the past two years."

Among individual Eastern European stocks, PF particularly likes MATAV, the dominant local phone company in Hungary. PF recommended the stock in July 2004, and it has rallied 20 percent since. But the newsletter still likes MATAV for its "7.3 percent dividend and blue chip status in the local market."

PF also likes Austrian energy giant OMV because of its aggressive expansion, fueled by the region's 5 percent annual GDP growth. "OMV's stock is inexpensive, trading at a discount of nearly 30 percent of trailing revenues. Given the growth potential in the region, it's an excellent long-term holding."

MEXICO. Our southern neighbor is now wide awake after its two-year market siesta, notes Personal Finance. "The local Bolsa index rose more than 44 percent in 2003 and another 49 percent in 2004." The newsletter's two favorite Mexican stocks are leading participants in the local economy. Both also have global reach.

On the retail front, PF likes Wal-Mart de Mexico. "Its revenues continue to grow at double-digit rates, and yet the shares remain reasonably valued at a mere fraction above the value of its trailing revenues."

Personal Finance's second Mexican pick is the world's largest cement manufacturer, Cemex. "Its growth has been spectacular, but the shares still trade at only a small fraction above its rapidly expanding revenues."

(Personal Finance, 1750 Old Meadow Road, McLean, VA 22102; bimonthly, $97 annually.)

(Investor's Notebook reflects the opinions of experts. It does not recommend any specific investments and no endorsement is implied or should be inferred. For more information, contact the individual firms cited.)

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