How Sentiments Sway Emerging Europe Economies and ETFs

The economies of Central and Eastern Europe (CEE), along with related exchange traded funds (ETFs), have been severely affected by pessimistic sentiment, but all may not be as dire as it seems for some countries.

Investors seemed to have grouped all the countries in the CEE region together, which caused indiscriminate, mass selling, remarks Nicholas Watson for Business News Europe. It is important to distinguish between the EU members and non-EU countries, and to specify issues pertaining to particular countries or banking groups.

In a joint statement from central banks of CEE, it is stated that the risks were simplified and misleading and as a result, banks in the region suffered. But many economists claim the region saved too little and borrowed too much from abroad to maintain exchange rates and run up current account deficits. It is thought that the CEE region will undoubtedly see slowdowns of capital inflow in the coming years.

It is now seen that the risk of pullouts by west European banks is low, but funding will be scaled down, reports Boris Groendahl for Forbes. Western ownership of banks in the region is said to be resilient.

Before, investors feared banks would leave (which would deprive the region of much-needed funding), as well as the possibility that bad eastern debts would bring down western governments.

• SPDR S&P Emerging Europe (GUR): up 11.7% in the last two weeks; note that it’s popped above its 50-day moving average