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* European earnings outlook: http://reut.rs/2553txN
* EM-focused stocks outperform: http://reut.rs/2aJk1W2
* Adidas, Carlsberg, Diageo near record highs
* Optimism about EM consumers underpins investor interest
* Mood on EM brightens:
By Atul Prakash
LONDON, Aug 5 (Reuters) - A rally in European stocks withexposure to emerging markets has driven some share prices closeto record highs, but betting against more gains may be prematuregiven the dim prospects of many of their developedmarket-focused counterparts.
Dismal growth outlooks for the likes of Russia and Brazilsoured sentiment in EM-oriented stocks until last year, sincewhen a sharp turnaround in mood has becomes a relative brightspot in an otherwise sluggish backdrop for European corporateearnings.
Based on current forecasts, the region's firms are, onaggregate, on track to report no earnings growth for the fourthyear in the past five, according to Thomson Reuters data.
The picture has been further clouded by Britain's vote toleave the European Union, suggesting the outperformance ofemerging markets-focused stocks -- Adidas, Diageo and Carlsberg, for instance, trade nearrecord highs -- may have further to run.
"The perception towards Russia in particular and emergingmarkets in general has changed," said Adrian Fitzpatrick, headof investment dealing at Kames Capital.
"The market, which has a short memory when things are goingin the right way, is quite sanguine about the region as thefocus has shifted to other issues."
Adidas shares are up 131 percent over the past year, whileCarlsberg is up more than 55 percent from last summer's lows.
Shares in Finnish tyre maker Nokian, which makesabout a third of its sales in Russia, have surged more than 80percent from a low hit in 2014. In that year, the toppling ofUkraine's pro-Russian president triggered the biggest rowbetween Moscow and the West since the Cold War, leading tosanctions that hobbled the Russian economy.
The broad STOXX 600, meanwhile, is down more than15 percent since last August.
That contrast extends to the embattled European bankingsector, where shares of EM-focused banks such as HSBC and Standard Chartered have outperformed significantly.
THE EM CONSUMER
"Clients are warming up to emerging markets," said AndrewGarthwaite, head of global equity strategy at Credit Suisse.
Noting reliance on emerging markets was much higher forfirms in Europe than in other developed regions, he said hewould still recommend clients buying into such firms -- thoughhe cautioned against companies with more than 15 percent ofsales generated in China.
The stocks that have stood out are largely focused onconsumers as personal spending in emerging markets has held uprelatively well as the pace of overall growth has eased. Theyalso pay relatively high dividends.
"Emerging market countries tend to have dynamic economieswith young workforces and burgeoning middle classes, which makesfor an exciting long-term investment opportunity," said LaithKhalaf, senior analyst at Hargreaves Lansdown..
"The political background is one of the risks in manyemerging economies, but after the euro zone debt crisis and theBrexit vote, let's not pretend that developed markets aren'tinfluenced by political interventions too."
Following the strong run, some analysts say some valuationscould have run ahead of fundamentals, particularly in the energysector.
"The strength in the emerging market space was more drivenby external factors than by an improvement in EM fundamentals,"said Philippe Gijsels, head of research at BNP Paribas FortisGlobal Markets in Brussels.
"This makes the current rally vulnerable also for Russianassets, especially when the oil price continues to decline,which is not inconceivable given the current oil market glut."
(Editing by Vikram Subhedar and John Stonestreet)
