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Profitable world markets attracting U.S. investors

Call Russia's wild stock market "cowboy capitalism" in Moscow if you like. It's riding a gain of about 160 percent this year.

It took forever for exotic Brazil to finally get down-to-earth with a sensible economy. An increase of more than 40 percent in its Bovespa stock market is providing added incentive.For decades, the German stock market in Frankfurt stoically rode the economic cycles. Now a multitude of average investors there want to go along for the ride, hitching to a gain of nearly 20 percent.

No two world stock markets are exactly alike, and there's often considerable volatility. But they're increasingly trying to get their act together, attracting U.S. investors in the process.

"Germany and, to a lesser degree, Japan are paying closer attention to providing return to shareholders and focusing on return on equity," pointed out Nicholas Bratt, director of the Scudder, Stevens & Clark global equity group.

Companies worldwide want to boost share prices so they can tap the capital market-American-style-and raise money more cheaply. As a result, it's a good time for investors to go exploring.

"While we're all comfortable in the U.S. market because it's our home, there's a bias that causes us to overlook other markets with opportunities," observed Douglas Johnson, senior international investment strategist with Merrill Lynch.

"Japan is the world's cheapest market now and only major market in the process of finding a bottom," said Ron Chapman, head of international equities for Dreyfus Corp. "Once it does, it will be ready to begin a new bull market."

Here's the expert low-down on some important world markets:

- Brazil, with $275 billion market capitalization in U.S. dollars, is up more than 40 percent this year. Latin America's strongest nation in natural resources is aggressively deregulating and liberalizing. Down from its peak, the market is robust. Corporate management gained savvy from handling a risky economy and government. Securities held by the most investors are Telebras and Electrobras.

- Germany, with $700 billion, is up nearly 20 percent. This cyclical market is dominated by cyclical companies, such as chemicals and capital goods. It prospers when the mark is weak, thanks to exports. Individual German investors lately have become interested in investing in their own market. Good earnings, high valuations and conservative accounting. Top securities are Allianz and Deutsche TeleKom.

- Hong Kong, with $423 billion, is about even. One of the most volatile markets, featuring 30 percent annual returns this decade, it's accessible and a mechanism for accessing greater China. There's little evidence the hand over to the Chinese is hindering the ability to make money. Top securities are Hutchison Whampoa and Sun Hung Kai Properties.

- Japan, with $2.9 trillion, is down about 6 percent. Companies issue earnings reports twice a year. Multiples are high, and one corporation often owns a chunk of another. A cyclical recovery is anticipated, though the market may remain in a trading range awhile. Top securities are NTT Corp. and Toyota Motor Corp.

- Malaysia, with $162 billion, is down more than 45 percent. This big Asian market, which helps set the tone for its region's markets, is in turmoil. It grossly overbuilt commercial real estate. It has a currency crisis, though there's potential benefit to exports. Invest at your risk. Top securities are Tenega Nasional and Telekom Malaysia.

- Mexico, with $143 billion, is up more than 50 percent. Utility, transportation and communication industries are twice the size of those in Brazil. Stock activity is dominated by New York sentiment, since many companies rade here as American depositary receipts. Top securities are Telefonos de Mexico and Grupo Modelo.

- Russia, with $115 billion, is up more than 160 percent. Statistically the world's most volatile, this market which works best for long-term investors is an oil and natural gas play. Disclosure's a problem in lower-tier companies, but regulatory standards are improving. Top securities are United Energy and Lukoil Holding.

- South Africa, with $270 billion, is up about 6 percent. This misunderstood market is diversified beyond gold, researched and liquid, with opportunities the financials and manufacturing. In light of its challenging post-apartheid transition and new education demands, investors should be cautious. Top securities are DeBeers Consolidated Mines and South African Breweries.

- United Kingdom, with $1.9 trillion, is up more than 14 percent. After strong gains, there could be inflationary worries and an earnings slowdown. It's a market of global name-brand companies held worldwide and local UK companies owned by UK investors. Accounting rules are loose and earnings emphasis short-term. Top securities are British Petroleum and Glaxo Wellcome.