(MONEY Magazine) – The tremendous surge in stock markets around the world in 1986 brought with it a deluge of new closed-end mutual funds that invest exclusively in the shares of single countries. Unlike more familiar open-end mutual funds, closed-ends issue a fixed number of shares that trade on stock exchanges or over the counter. When most of these funds made their debuts last spring, they shot up to large premiums over the total value of the stocks in their portfolios. ''Many first-time buyers didn't realize how much they were overpaying for fund shares,'' observes Thomas J. Herzfeld, a Miami money manager who specializes in closed-end funds. Late in 1986, though, foreign stock markets pulled back sharply after massive advances. The closed-end funds for those countries plunged even further because of investor disappointment, and many are now selling at large discounts to their breakup values. Herzfeld considers three closed-ends to be exceptional bargains: First Australia Fund (American Stock Exchange, $10.25), which sells for a 16% discount from breakup value. Herzfeld likes the fund because he thinks the Australian dollar has stabilized and because the fund recently announced that it will begin buying back up to 15% of its outstanding shares. France Fund (NYSE, $10.75), which can be bought for 26% below breakup value. ''The recent move by the Chirac government to privatize many of the companies that were nationalized a few years ago should help strengthen the French market this year,'' says Herzfeld. Italy Fund (NYSE, $10.25), which sells at a 23% discount. Herzfeld expects the Italian market to do well in 1987 as individual Italian investors continue to pour money into it through mutual funds.