Time for Poland ETFs? - ETF News And Commentary
September 24 2013 - 12:09PM
Zacks
Poland managed to avoid
the worst of the emerging markets meltdown due to its lower
dependence on hot money as well as sound macroeconomic structure.
Further, it is one of the few countries in Europe that has been
able to weather the economic crisis in the eurozone. The country’s
solid economic performance despite the weakness in many of its
neighbors can be attributed to the internal strength of the
economy, and significant reforms undertaken in the
recent past. (Poland ETF Investing 101).
However, the economy, which survived the four years of economic
crisis, began to show new signs of weakness in 2012. Reduced
government spending along with waning consumer confidence resulted
in slower growth of the economy in 2012. Further, lower export
demand attributable to the deepening crisis in the Euro-zone also
dampened the growth of the economy to some extent.
But the outlook for the economy seems to have changed. With the
eurozone economy reviving, exports from the region are once again
strengthening thereby providing a strong support to the economy.
Exports climbed 6% in the first six months of 2013 (4 Outperforming
ETFs Leading Europe Higher).
Moreover, with the increase in export levels, current account
deficit which was one of the major concerns for the economy seems
to have reversed. After 13 years of current account deficit, the
region recorded its first current account surplus. Also,
domestic demand which was undermined by a weak economic outlook for
the main trading partners of the country is now gaining
strength.
Besides, improved retail sales and industrial production are
instrumental in getting the economy back into shape. Further
evidence of the improving economic outlook going forward is
Poland’s reduction in budget deficit and stabilizing government
debt. The upgrade of the debt rating outlook by Fitch from stable
to positive bears testimony to the same (European ETFs: A Surge in
Popularity).
In fact, for 2013, the European Commission once again appears to be
positive on the outlook for the Polish economy. It anticipates the
economy to grow at the rate of 2% in 2013 and 3% in 2014. For the
long term, the economy expects its growth rate to reach 4%.
Problem
Following a sharp slowdown in 2012, GDP growth is projected to pick
up as investment and exports recover. Yet reduced consumer spending
and joblessness in particular, remains a matter of concern for the
Polish economy. Unemployment stands at 13%.
iShares MSCI Poland Investable Market Index Fund
(EPOL)
Investors seeking a broad exposure to the Polish equity market
might find EPOL an interesting pick (Poland ETFs Head-To-Head).
The product focuses largely on the large cap segment of the Polish
market and holds 43 securities in its basket. The majority of
holdings are classified as blend stocks from a style
perspective.
The fund is heavily concentrated in its top 10 holdings with nearly
63.2% of the total assets. The top three companies combined to make
up nearly 32.2% share of the portfolio.
From a sector perspective, the product has a certain tilt towards
the financial sector which makes up 50% of the ETF. Materials and
energy sectors also get double-digit allocation in the fund.
With an AUM of $312.4 million, the product charges 61 bps in fees
per year from investors. The ETF has generated a negative
year-to-date return of 5.31%, indicating that the economy had a
slow start to the year.
Market Vectors Poland ETF
(PLND)
The fund holds 30 securities in its basket, with a heavy focus on
the top 10 holdings that account for about 60.4% of the assets. The
top three companies take away more than 24.4% of the holdings.
In terms of holdings, financials consists of more than one-third of
the holdings followed by double-digit weightings to energy (15.6%),
utilities (12.1%) and materials (10.7%). The ETF has total assets
of $27.5 million. The fund charges a fee of 61 basis points
annually (Europe ETF Investing).PLND’s year-to-date loss stands at
2.23% .
Bottom Line
Poland remains a robust option when compared to many of its peers
in the region as well as other emerging markets. Additionally, its
projected growth rate is far in excess of what many other economies
are seeing in the area, suggesting that Poland could still be a
great option.
It is still one of the strongest performers in the European Union.
The economic strength foreseen in the second half of 2013 could
thus boost equities in the nation and make Poland a solid play.
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ISHARS-MS POLND (EPOL): ETF Research Reports
MKT VEC-POLAND (PLND): ETF Research Reports
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