By Jeremy Gaunt, European Investment Correspondent
LONDON, Sept 10 (Reuters) - Investors have watched with some surprise -- and pleasure -- over recent months as Germany's economy has blossomed on the back of emerging market growth.
Busy German exporters have offered clear opportunities to make relatively mainstream equity investments that give indirect exposure to less accessible markets such as China.
But there is also a growing spillover from German companies into Dutch, British, Swedish and other regional firms that have become proxies for German growth.
It is known as "the halo effect".
Europe's largest economy expand by 2.2 percent in the second quarter from the previous three months -- the fastest quarterly growth in a reunified Germany.
It was a reflection of its role as a hub for both the luxury goods sought by rising wealthy classes in Asia and the kind of specialised industrial equipment needed to sustain frenetic infrastructure growth.
"The guys in the emerging markets ... want their white goods, their Bosches and their BMWs," said Mike Lenhoff, chief strategist at British wealth manager Brewin Dolphin. "Germany is in a good position. It has the goods that the developing world wants."
Export-related stocks have already risen quite substantially, but the driver of emerging market growth is not expected to dissipate soon.
Neil Dwane, chief investment officer, Europe, for fund firm RCM noted that having built up its coastal regions, China was now in the process of transforming the its vast centre.
For investors, the obvious stock targets to tap into have been the likes of German chip maker Infineon, up nearly 12 percent year-to-date, pharmaceuticals to chemicals giant Merck, up more than 9.5 percent, and industrial gases group Linde, up 12.5 percent.
Societe Generale estimates the percentage of these companies' sales coming from Asia to be 44.9 percent, 31 percent and 28 percent respectively.
Germany's blue-chip DAX index, home to these three as well as multinationals such as Siemens and BMW, is up over 4 percent year-to-date, outperforming major counterparts such as the Dow Jones average and France's CAC.
Developed-market stocks globally have fallen close to 3 percent this year, according to MSCI.
PROXY OF A PROXY
One problem for investors is that a lot of German companies linked to the export boom are not traded. Some are large, like appliance and car-part maker Bosch, but others fill the middle ground of German business.
Investors, however, can find another avenue to lock into the German growth story as demand from there spills over into nearby countries.
Joost de Graaf, senior portfolio manager with Kempen Capital Management, sees the Netherlands as a large beneficiary because of the high export exposure Dutch companies have to Germany.
"Between 40 and 45 percent of Dutch exports go to Germany," he said. Although a lot of it is agriculture, a large part is also semi-finished and other industrial parts, that would feed the German export boom.
De Graaf cited as one example, Aalbert Industries, an industrial services company with close to 18 percent of its revenues coming from Germany.
The firm's shares are up around 20 percent year to date.
In Britain, meanwhile, a lot of the remaining industrial manufacturing is high-end, again likely to benefit from rising German demand.
Stephen Dowds, an analyst at UK hedge fund Hume Capital, pointed to companies such as GKN, a transport parts maker, whose stock price is up 33 percent this year.
Another, Spectris, develops instruments and controls designed to enhance productivity. Its share price is up nearly 38 percent since the end of last year.
"Spectris ... has 11 percent of sales in Germany, its largest market," Dowds said.
This kind of thing comes as little surprise to Dwane of fund firm RCM.
"Austria, France and the UK have all been benefiting from the strength of Germany in the last six months. There is a halo effect," he said.
Dwane said Swedish companies such as Sandvik and Atlas were also feeling the glow.
The question is whether it is sustainable. If it is, the result is not only likely to be good stock pickings across Europe from German growth, but also perhaps a trickle down effect on the region's less vibrant economies. (Editing by Mike Peacock)