An ETF to Ride the Polish Juggernaut
December 18th 2009 at 1:00am by Tom Lydon
The new country-specific Polish exchange traded fund (ETF) came onto the markets during a time of poor trading on the Warsaw index. However, this shouldn’t deter potential investors from looking for a good investment opportunity in the frontier markets.
Van Eck recently launched the first Polish ETF, Market Vectors Poland (NYSEArca: PLND), which has a daily volume of around $300,000 and total assets of $2.4 million, writes Daniel Harrison for IndexUniverse.
Many consider Poland to be Eastern Europe’s fastest-growing frontier market because of the country’s prudent domestic fiscal policies. Polish citizens are also required to make contributions of 3.5% of their annual salary to private pension fund providers that put the majority of the money into domestic assets, helping to support the value in equities.
Poland is projected to grow 1% this year, followed by a 2.5% expansion for 2010. Unemployment reached 10% this year, but favorable signs show that the employment rate is gradually rising. [More stories about Eastern Europe.]
Maciej Baranski, an analyst at Warsaw-based broker Bank Zachodni Wbk, believes that the Poland’s equities will recover what they lost in the short-term and the economy will do well for the next 2 1/2 years as cheap manufacturing costs have put factories at full capacity.
If you’re betting on a continued global recovery and see that banks are doing well off the March lows, PLND may do better than most. Poland is one of the more advanced Eastern European countries and should benefit from the lower U.S. dollar and higher oil and metals prices.
The largest sector in PLND’s portfolio is financials at 40%. The financial sector trades at a price-to-book value of 2.4 and a calculated 2.2 times book value in 2010, compared to an average 1.6 times book value for financials in other frontier markets. The fund’s largest holding is in PKO bank at 9.3%, and it trades at 2 times it breakup value. [Poland: a good place to start investing?]
For more information on Poland, visit our Poland category.
- Market Vectors Poland (NYSEArca: PLND): down 2.4% in the last week; expense ratio of 0.76%; financials is 40.2%, energy is 13.6%, industrials is 11.0%, consumer staples is 8.6%, materials is 7.8%, telecommunication services is 6.8%, consumer discretionary is 6.7%, information technology is 4.1% health care is 1.2%
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.