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Financial markets in pre-euro state, says Finland's Varma

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FINLAND - Euro-zone financial markets have reverted to pre-single currency behaviour and a common euro market no longer exists, Finland's €33bn pension provider Varma has argued.

Unveiling its results for the first six months of 2012, the provider's vice president of investment Risto Murto said that the "developing" corporate bond market in his home country had been beneficial to Varma -with fixed income comprising 40% of total assets.

However, he noted the "highly conflicted" situation in the investment market in the six months to June, saying that its returns were "relatively good" at 3.4%, despite the "unprecedentedly deep" crisis in the euro-zone.

"From an investor's point of view, the euro-zone financial markets have largely reverted to the pre-euro period, and common euro markets no longer exist," Murto said. "A great deal of time and effort will be required to rectify the situation."

However, despite the negative assessment of the single currency and the euro-zone's cohesion, equity investments still led Varma's returns with 5.4%, although this was largely helped by 10% returns from private equity and 7.6% garnered through unlisted equity.

Hannu Tarvonen, the provider's deputy chief executive, insisted that the country's pension system remained "reliable and financially sound", with its solvency capital broadly stable, with only a "minor" impact predicted by the merger of two risk buffers mandated for January next year.

"The problems in the economy and uncertainty in the financial markets have continued beyond the reporting period," Tarvonen added. "Varma's main objective is to safeguard the company's strong solvency, since it provides a good buffer against volatility in the markets."

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