In my never-ending quest to find bargain countries or regions, I've been noticing Austria recently. Yes, I know. Not exactly a country with a lot of buzz, Austria has a relatively small stock market, a paucity of New Economy plays and a government that has somehow become the pariah of Europe. It's rarely on the top of many investors' wish lists.

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Yet that neglect may have turned into a buying opportunity. And in that light, Austria may soon offer investors more than

Mozart

festivals and

Sound of Music

tours.

Recent times have not been easy for Austria. The country has suffered the opprobrium of the rest of Europe due to the inclusion in the government earlier this year of far-right politician Joerg Haider, who is suspected of harboring Nazi sympathies. The sanctions imposed by the

European Union

were political, not economic, but they lessened investor enthusiasm in the country. The benchmark

ATX

index dropped around 9% at the time of crisis in February. Of course, the sanctions have not been the only cause of the index's 5% drop this year. Austria's markets have been battered like those of so much of the rest of the world. However, the market has revived in recent months, rising 15% since its low in March.

That rise may be more than a momentary upswing. Austria, despite its being shunned, shares with the rest of Europe many of the reasons for investor optimism. Like many other advanced economies in Europe, it is experiencing strong growth, with expected

GDP

growth of 3.1% this year and 3.3% in 2001, according to the

International Monetary Fund

. It is enjoying U.S.-style low inflation and low unemployment. In fact, the jobless rate should fall to 3.9% by next year, which is almost unheard of for Europe. It also offers a gateway to the emerging European markets, such as Poland and the Czech Republic, because many of the companies contributing to their growth are based in Austria.

In addition, the Austrian market as a whole is considered by many to be undervalued. Because of the relatively small number of companies and the paucity of New Economy plays, it hasn't struck investors' fancy recently. "It is among the cheapest stock markets in the world," says Michael Porter, closed-end and exchange-traded funds analyst at

Salomon Smith Barney

. "Yet it is a developed, first-world economy." He believes that sooner or later investors will notice the bargains in Austria and head back in.

Moreover, the market might rally if the Europeans lift the sanctions against the Austrians. Although France and Austria are still having a bit of a feud about the issue, Haider has since left the government (although his party is still represented) and signs are good that the sanctions will be lifted by the end of the year. "You might see a sentiment rally," says John Tribolet, who manages the European portion of the

(LSIEX)

Loomis Sayles International Equity Fund. However, Tribolet is not going to play that game. The fund currently owns no Austrian companies.

Solly's Porter is more bullish. Austria is one of his favorite countries these days. He recommends both of the two direct ways to play Austria available to U.S. investors. The first is closed-end

Austria Fund

(OST)

, which is down 19% this year and is trading at a 19% discount. The second is the

iShares MSCI Austria

(EWO) - Get Report

, which tracks the

Morgan Stanley Capital International

index for the country.

A big cloud on the horizon right now is the acquisition announced this week of

Bank Austria

by German bank

HypoVereinsbank

. The deal has been good news for Bank Austria, which has seen its shares rise sharply on the deal. However, it could be bad news for the index as a whole. If the new company is listed in Germany, not Austria, it removes one of the largest and most attractive companies from the Vienna bourse. The banks have announced they will have a dual listing, but details of how this will work are sketchy.

Is Austria a sure bet? Remember, the challenge of international investing is not figuring out what country is hot now, but what the next one will be. Austria could be the one.

David Kurapka's Global Portfolio column appears Wednesdays and Fridays on TSC. In keeping with TSC's editorial policy, he does not own shares in any companies or mutual funds mentioned in this column. He also doesn't invest in hedge funds or other private investment partnerships. He welcomes your feedback at

dkurapka@thestreet.com.