There has been ample talk in recent weeks that Cyprus is on
the brink of departure from the eurozone, but there is no
Cyprus-specific ETF for eager short-sellers to pummel.
However, most of the 17 members of the common currency program
are tracked by a U.S.-listed ETF. Yes, there is even a Finland
ETF, the iShares MSCI Finland Capped Investable Market Index Fund
One nation represented by two country-specific
wants in on the euro despite currency's obvious woes. That
country is Poland. On Wednesday, Polish prime minister, Donald
Tusk said he is open to a referendum that would allow for a
change to the country's Constitution, which could pave the way to
joining the common currency regime.
Under the current construction of Poland's Constitution, only
the zloty can serve as the country's currency,
according to the New York Times
While Poland's membership as a euro country is still at least
several years away, the impact such a move could have on the
iShares MSCI Poland Capped Investable Market Index Fund (NYSE:
) and the Market Vectors Poland ETF (NYSE:
) is worth lamenting. Combined, the two ETFs have about $180
million in assets under management, a number that has previously
Both ETFs have struggled this year on fears economic growth is
slowing in Poland. Poland, which has been an economic juggernaut
in Eastern and Central Europe, is expected to have GDP growth of
just 1.2 percent this year,
according to the European Commission's latest
. That estimate is down from the previous call of 1.8 percent
growth and would represent Poland's most slack pace of growth in
Remember, Poland is classified as an emerging market. Many
investors are not going to scurry to 1.2 percent growth rates
with the subsequent emerging markets volatility when comparable
if not better growth can be had in less volatile developed
markets such as the U.S.
Not surprisingly, EPOL is down 14.1 percent year-to-date. PLND
has not been a peach either with a loss of more than 12 percent.
Call that an average loss of 13 percent for the Polish ETF pair,
but it is still better than what investors would have gotten with
the ETFs tracking several current Eurozone members.
For example, the Global X FTSE Greece 20 ETF (NYSE:
) is offer more than 20 percent year-to-date. The iShares MSCI
Italy Index Fun (NYSE:
) is down 14.2 percent. The iShares MSCI Spain Index Fund (NYSE:
) looks good by comparison, but over the past two years, EWP has
plunged nearly 34 percent. EPOL and PLND have not been great over
that time, but they have been better than EWP.
It is not just the slack GDP forecast that has plagued Poland
ETFs this year. The country's unemployment rate hit 13.4 percent
in December. However, not to be trite, that would imply Poland
would fit in quite well in the eurozone as unemployment in Greece
and Spain is noticeably higher than 13.4 percent.
Actually, the European Union should be courting Poland, not
the other way around. Growth of 1.2 percent this year is still
growth, something that is going to be hard to come by in
eurozone's peripheral nations. The eurozone is already home to
one emerging market in the form of Greece. To clarify, one index
stripped Greece of its developed market status
earlier this year
Poland's economy, while dealing with obvious near-term issues,
has proven somewhat resilient to eurozone shocks. A growing
middle class has fostered strong domestic demand, meaning EPOL
and PLND are not ETFs that are deeply tied to a fragile export
Another way of looking at the situation is if European leaders
saw fit to let Cyprus and Greece into the eurozone, why not let
in Poland in? Last year, only five countries that use the euro
had larger economies than Poland - Germany, France, Italy, Spain
and the Netherlands.
Again, it will be a few years, if ever, that Poland adopts the
euro. That might be good thing for EPOL and PLND because a case
can be made that Poland brings more to the table than the euro
offers in return.
For more on Poland, click
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