LONDON – Stocks from Austria, Greece and Portugal were among the top European gainers last year as they reaped the rewards of emerging market exposure, but recent tumbles have sparked concerns about future growth potential. Austrian oil group OMV was the top gainer on Europe’s FTSEurofirst 300 index in 2005, adding 123.3 percent due to soaring energy prices and growth in Eastern Europe, especially after its purchase of Romanian peer Petrom. However, the stock has dropped more than 20 percent from a record high of 60.98 euros hit in January as emerging markets suffered most in the global equities correction of May and June, when investors fretted over rising borrowing costs. OMV was especially hit when it reported weaker-than-expected quarterly profits in May with Petrom disappointing. A bid to take over Austrian utility Verbund also hurt before shares recovered some ground as the deal collapsed. «The birds came home to roost. Petrom was very inefficient and things came out of the woodwork. OMV has moved with emerging markets. It benefited on the way up and it has been kicked on the way down,» said an analyst who asked not to be named. «But given how beaten up it’s been, if the oil price remains robust it should actually do OK.» Bank strategists saw potential for further growth from firms on Western Europe’s extremities at the start of the year. Greek telecom companies OTE and Cosmote, along with Telekom Austria, were among several banks’ top 2006 picks, partly due to emerging-market exposure. Cosmote was expected to have fast growth in the Balkans and Telekom Austria was also hailed by some analysts for having a unique portfolio of Southeast European assets. But, OTE is down 5 percent in 2006, Cosmote has fallen 4 percent and Telekom Austria has slipped 5.5 percent. Eastern European currencies have recently struggled due to the reduction in global liquidity and the exposure of some Western European banks through branches or subsidiaries in the region has lead to particular worries about their own prospects. Lehman Brothers says Austria’s Raiffeisen, Bank Austria and Erste Bank, along with Portugal’s Millennium bcp, are among those most at risk. «Currency weakness in Eastern Europe matters for two reasons. Firstly, it reduces the value of the free cash flows that the parent company can repatriate i.e. reduces the value of its investment,» said Lehman’s Nick Anderson. «Secondly, but more importantly, it may trigger a deterioration in credit quality given the preponderance of foreign currency loans.» Erste Bank, which has a large presence in Eastern Europe and last December won the tender for Romania’s biggest bank BCR, is 5 percent down in 2006. Meanwhile, shares in Greece’s Alpha Bank, which wants to expand in the Balkans, have also slipped.