Accommodative Monetary Policy Could Bolster Poland ETFs

January 8th at 1:44pm by Max Chen

Poland exchange traded funds have lagged behind other European markets but are receiving a helping hand from the government as the central bank pledges to keep rates at record lows to stimulate the economy.

The iShares MSCI Poland Capped ETF (NYSEArca: EPOL) declined 5.9% over the past month and the Market Vectors Poland ETF (NYSEArca: PLND) fell 6.2%. Over the past year, EPOL gained 2.6% and PLND was up 2.9%.

Narodowy Bank Polski, or the National Bank of Poland, left benchmark seven-day interest rates at 2.5% for a sixth month, citing “low” demand and cost pressures in Poland, Bloomberg reports.

The central bank’s decision comes off recent economic data that revealed Poland’s manufacturing sector unexpectedly slowed last month. Inflation, though, has slowed for a third month in November and hovers below the central bank’s target.

“Essentially, we’re where we were last month and I don’t see any reason to change our language,” Governor Marek Belka said. “Inflation is indeed low and will remain below the target over the forecast horizon.”

Poland’s economy expanded at a 1.9% annual pace in the third quarter, which is still below the average rate of 4.1% for the past decade.

Forward-rate agreements point to a quarter point hike in benchmark interest rates within 12 months. Piotr Lysienia, senior economist at Bank Pocztowy SA, anticipates the first increase to come between the third and fourth quarters.

The iShares EPOL ETF takes a heavier tilt toward financials, with 14.4% in PKO Bank Polski SA and a 53.0% weight toward the financial sector. The Market Vectors PLND ETF also has a significant weight toward financials at 43.5%, but the fund shows a slightly more diversified portfolio, with the largest holding Powszechna Kasa Oszczednosci Bank Polsk only accounting for 8.1% of the ETF.

Both funds also offer decent yields. Both EPOL and PLND have a 3.31% trailing 12-month yield. However, investors will have to be comfortable with the riskier nature of investing in an emerging economy.

iShares MSCI Poland Capped ETF

For more information on Poland, visit our Poland category.

 

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