Relative to the recent rally in other emerging markets
, the surge in the two funds devoted exclusively to Poland has
gone somewhat unnoticed. What is even less discussed is a point
that makes the recent upside moves by the iShares MSCI Poland
Investable Market Index Fund (NYSE:
) and the Market Vectors Poland ETF (NYSE:
) all the more impressive.
That point being slowing economic growth. Poland posted
third-quarter GDP growth of just 1.4 percent, its lowest growth
rate since 2009 and one that is not what investors typically look
for when evaluating emerging markets.
Poland is now at risk of a recession and policymakers there
are forecasting a glum end to 2012 and a rough first half of 2013
before the economy brightens in the latter half of the new year,
the Wall Street Journal reported
Still, EPOL and PLND continue to run to the upside. PLND, the
Market Vectors Poland play with almost $33 million in assets
under management, has surged more than 13 percent in the past
month. EPOL, which has nearly $180 million in AUM, has jumped
12.6 percent over the same time.
Noteworthy is the fact that both ETFs are again seen printing
new 52-week highs today. Arguably, what is more noteworthy is the
fact that both are still a long way from their all time highs.
PLND is flirting with $23, but the ETF traded over $31 in April
2011. EPOL is currently trading above $39, but that ETF flirted
with $40 in late April 2011.
In fact, EPOL has gained more than 25 percent and PLND has
jumped nearly 24 percent since
the long-term bull case for Poland was
highlighted six months ago
. That bull case includes a services driven economy that is not
as export-dependent as some outsiders believe and still largely
untapped (and bountiful) reserves of shale gas.
Still, there are risks. While Poland was able to skirt a
recession during the global financial crisis in 2009, the country
does suffer from guilt by proximity. Meaning that even though it
is not a member of the Eurozone, developed Europe's debt woes can
have an adverse impact on Polish equities. Additionally, some
have unfavorable outlooks for the Czech Republic
. Poland's proximity to those countries is not a plus if debt and
equity markets there flounder.
Weighing on all three nations is the expectation by some
analysts and investors that
Emerging Europe could be the weakest developing
region in 2013
There are other points in favor of EPOL and PLND. The latter
has a trailing 12-month yield of 3.54 percent while the former's
trailing 12-month yield is a robust 4.72 percent. Plus, Poland,
at least as measured by these ETFs, is inexpensive relative to
the broader emerging markets universe.
PLND had a price-to-earnings ratio of 7.54 and a price-to-book
ratio of 1.17 as of November 30,
according to Market Vectors data
. EPOL's P/E is 12.24 and its price-to-book ratio is 1.69,
according to iShares data
. That compares to a P/E of 17.31 and a price-to-book ratio of
3.02 for the iShares MSCI Emerging Markets Index Fund (NYSE:
The valuations are noteworthy because EPOL and PLND traded at
substantial discounts to EEM, some country-specific emerging
markets funds and broader developed Europe ETFs in June.
Six-month returns for EPOL and PLND indicate that investors do
find Poland attractive when it trades at a discount.
For more on Poland ETFs, click
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