Amidst the intensifying European problems, Poland is the only
emerging nation in the region that has avoided recession until now.
In fact, the country stands out as a major gainer during the global
recession when compared to its neighboring countries, generating
4.8% growth in 2008, 1.7% in 2009 and 3.8% in 2010 (read: Three
Resilient European ETFs Still Going
Strong).
Furthermore, the Polish economy expanded 4.3% last year. This
growth now appears to be slowing down due to increasing problems in
Western Europe, falling domestic demand, ongoing fiscal
consolidation, and slowing public investment.
As a result, the growth is expected to fall to 2.4% this year
and then to 2.1% in the next, as per IMF. However, these
expectations are better than the other emerging European countries,
although inflation is still a troubling issue, coming in at 3.55%
over the summer.
Among the risks, current unemployment rate at 12.4% is the major
concern for the nation’s growth. The Polish economy, the sixth
largest economy in the euro zone, has also experienced substantial
trade deficits over the past several years. The trade deficit is
now expected to rise to 3.5% of GDP from the previous forecast of
2.9% this year.
The country mainly exports machinery and equipment, textiles and
footwear, metals and metal products, minerals and fuels, chemicals,
and agricultural products. Germany is the largest trading partner
of Poland (accounting for about 25% of the exports), followed by
Italy, France, Turkey, Hungary and Bulgaria (read: The
Comprehensive Guide to German ETF Investing).
Despite several issues, the Eastern European nation arguably has
a much better investing climate than the majority of its neighbors
to endure a sharp economic downturn. This is because Poland has far
less worries on the corruption front while having a well-educated
and tech savvy workforce. In fact, Poland currently ranks in the
top fifty countries from a competitiveness standpoint, beating
nearby Russia out by over 20 places.
Thanks to this competitiveness and large size of the Polish
economy (the nation is one of the 20 largest economies in the
world), it could be time to give the nation a closer look. Poland
still enjoys a stable credit rating from the three major agencies
and its financial system remains steady.
Further, the ongoing turmoil in the European markets and a still
dismal job scenario in the U.S., investors are looking to shift
their exposure to the emerging European market, in particular
Poland, which is among the best-performing emerging countries
(read: Get True Emerging Market Exposure With These Three
ETFs).
How to Play?
With that being said, we still believe Polish economic and
political conditions are stronger relative to other European
countries, compelling investors to play there over the other
markets in the region. Currently, investors have two Polish ETF
options in the market, each of which offers great exposure to the
nation’s economy (read: Poland ETFs Head-To-Head).
An ETF approach in the basket form is the best way that provides
strong returns with minimum risk thanks to diversification and tax
benefits. The details of these ETFs are provided below:
iShares MSCI Poland Investable Market Index Fund
(EPOL)
Investors seeking broad exposure to the Polish equity market
might find EPOL an interesting pick. Launched in May 2010, the fund
seeks to match the price and yield of the MSCI Poland Investable
Market Index, before fees and expenses.
The product focuses largely on the large cap segment of the
Polish market and holds 45 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 69% of the total assets. The top three
companies combined to make up for nearly 34% share of the
portfolio.
From a sector perspective, the product has a certain tilt
towards the financial sector making up 42% of the ETF (read: Does
Your Portfolio Need a Financial ETF?). Materials, energy, utilities
and telecommunication services round up to comprise the next four
sectors with a combined 47% share.
With AUM of $140.7 million, the product charges 59 bps in fees
per year from investors. Volume is quite good, trading in more than
70,000 shares per day on average, suggesting a tight bid ask
spread. The ETF has generated outstanding returns of over 28% so
far in the year (as of October 16) and yields an impressive annual
dividend of 4.83%.
Market Vectors Poland ETF
(PLND)
Launched in November 2009, the fund tracks the Market Vectors
Poland Index, which consists of 25 companies that are either
headquartered in Poland or produce at least 50% of their revenues
from the nation (see more ETFs in the Zacks ETF Center).
The fund holds 30 securities in its basket, with a heavy focus
on the top 10 holdings that account for about 60% of the assets.
The top three companies dominate more than 24% of the holdings.
Though the product puts more focus on large cap stocks, mid cap
takes 22% share with only 1% going to small caps.
In terms of holdings, financials consists of more than one-third
of the holdings followed by double-digit weightings to materials
(16%), energy (16%), and utilities (12%). The ETF has total assets
of $32.5 million and sees a moderately good volume of about 13,000
shares per day.
This implies that investors have to pay additional cost in the
form of a wide bid/ask spread, beyond the expense ratio of 0.60%.
The product lags EPOL by a single basis point in terms of fees
(read: Are Analyst Recommendation ETFs Worth the Cost?).
PLND has generated excellent returns of nearly 25% year-to-date
(as of October 16) and yields a good dividend of 3.60% annually.
This suggests that investors have a decent long-term choice on
their hands in this Poland ETF.
Provided below is the summary of the two Polish ETFs discussed
above for those seeking a side-by-side comparison:
|
EPOL
|
PLND
|
Inception Date
|
05/25/2010
|
11/24/2009
|
Index
|
MSCI Poland Investable Market Index
|
Market Vectors Poland Index
|
AUM (in millions)
|
$140.7
|
$32.5
|
No. of Holdings
|
45
|
30
|
% of assets in Top 10 Holdings
|
68.83%
|
60.13%
|
Expense Ratio
|
0.59%
|
0.60%
|
YTD Return (as of October 16)
|
28.13%
|
24.62%
|
Dividend Yield
|
4.83%
|
3.60%
|
Want the latest recommendations from Zacks
Investment Research? Today, you can download 7 Best Stocks for
the Next 30 Days. Click to get this free report >>
ISHARS-MS POLND (EPOL): ETF Research Reports
MKT VEC-POLAND (PLND): ETF Research Reports
To read this article on Zacks.com click here.
Zacks Investment Research
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days. Click
to get this free report
iShares MSCI Poland ETF (AMEX:EPOL)
Historical Stock Chart
From May 2024 to Jun 2024
iShares MSCI Poland ETF (AMEX:EPOL)
Historical Stock Chart
From Jun 2023 to Jun 2024