ABN Amro Asset Management remains confident in the outlook for its recently launched single country funds in Brazil and Russia, despite the US Federal Reserve raising interest rates for a 17th straight time in a bid to ward off inflation.

Fears of a slowing US economic growth have hit emerging markets in recent weeks, with early estimates suggesting more than $14.5 billion has left the asset class since April.

However Claudia Barrulas, vice president and product specialist in emerging markets at AMN AMRO Asset Management, says she remains confident that now is the right time for the two new fund launches, pointing out that the fundamentals of both Brazil and Russia remain good.

"While weÆre expecting to see a modest slowdown in global economic growth, a weaker US economy will be compensated for by a stronger-than-expected Europe and Japan," she says, pointing out that riskier assets such as emerging-market stocks had taken an excessive beating.

She expects the quarter-percentage point rise in US rates, taking interest rates to 5.25%, the highest level since March 2001, to be the last hike of 2006.

"When volatility is increasing, what we look for is countries with stability at the economic and political levels, a commodity-driven economy, as well as domestic drivers," she says. "Both Brazil and Russia fit the bill."

Oil and mineral-rich Brazil, Barrulas says, is one of the few countries in the world that is currently reducing interest rates. Rates now stand at 15.25%, compared to 18.25% this time last year, and almost 25% this time in 2002.

"From an investor's perspective this is all very positive," she says. "Highly-leveraged companies are able to repay their debt, thus reducing their risk profile. Exports of both hard and soft commodities are rising to meet international demand, and unemployment is now less than 10%."

Russia is equally attractive, she says, despite it being one of the few countries in the world with negative real interest rates, and a nagging inflation rate of 12%. Foreign reserves of $300 billion give Russia drastically improved stability, she says.

In terms of valuations, Brazil has a forward price/earnings ratio of around 8, the lowest among emerging markets, while Russia has a forward P/E ratio of around 10, still below the emerging markets average of around 10.5, she said.

In contrast, India has a P/E ratio of around 16.9. India was among the most favoured emerging markets by many fund managers prior to the sharp volatility in global financial markets triggered by US inflation fears.

"Both markets have benefited considerably from high commodity and energy prices and will continue to do so," Barrulas said, adding that both markets are also benefiting from an improved political climate and strong domestic consumption.

These themes, she says, have been translated into ABN AMRO's two new funds single country funds for Brazil and Russia û the first to be authorised in Hong KongÆs retail market.

The annual management fee is 1.75% of net assets for the ABN AMRO Brazil Equity Fund, and 2% for the ABN AMRO Russia Equity Fund. Both funds have a sales charge of 5.25% of the subscription amount.

ABN AMRO Asset Management manages around $30 billion in emerging markets globally. It manages around $230 billion across all markets worldwide.