Russian stocks are undoubtedly trading at deep discounts. Not only are Russian equities cheap relative to the broader emerging markets universe, but they are also sharply discounted on the basis of 10-year forward P/E and price to book ratios.
There are signs that investors are nibbling at Russian equities. The Market Vectors Russia ETF (NYSEArca: RSX) and the SPDR S&P Emerging Europe ETF (NYSEArca: GUR), which has a 58.2% weight to Russia, are both up 6.5% in the past three months. [A Look at Cheap EM ETFs]
Decent performances, but the better way to have gained exposure to Emerging Europe has been with Poland ETFs. Over the past 90 days, the Market Vectors Poland ETF (NYSEArca: PLND) and the iShares MSCI Poland ETF (NYSEArca: EPOL) are up an average of 17.3%. [Data Powers Poland ETFs Higher]
Recent gains for EPOL and PLND are all the more impressive when considering that in early September, the two ETFs were slammed by news that the Polish government, in an effort to reduce its debt burden, planned to remove $37 billion in sovereign debt from pension funds holdings those bonds.
Part of the reason EPOL and PLND, the older of the two Poland ETFs, have been strong single-country performers is the solid zloty. As currencies from Brazil to India to Indonesia to Turkey wilted, Emerging Europe currencies, including Poland’s zloty, stood tall. [Zloty Helps Poland ETFs Stay Strong]
EPOL and PLND have also been boosted by the country’s recently posted current account surplus. It is widening account deficits that have plagued the rupee, rupiah along with India and Indonesia ETFs.
Market observers are taking note of Poland ETFs’ prowess and the country is moving up the ranks of Citigroup’s emerging markets value-plus-momentum model.
“The big mover over the last quarter has been Poland, from 13th last quarter to the 3rd most attractive market now. The main reasons for the big move in Poland is a very significant improvement in EPS revisions vs the rest of EM from 18th to having the best revisions,” the bank said, according to Barron’s.
Market Vectors Poland ETF
ETF Trends editorial team contributed to this post.
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.