The International Monetary Fund (IMF) stated that Poland’s “limited reliance on exports, flexible exchange rate and contained external and internal balances” allowed the country to avoid a recession this year, reports Meena Thiruvengadam for The Wall Street Journal. The IMF estimated that Poland’s economy may expand 1.1% this year and 1.9% in 2010.

The Organization for Economic Cooperation and Development (OECD) expects the Polish economy to grow 1.4% this year and 2.5% in 2010, according to Warsaw Business Journal. The economy was aided by a sound banking sector, unleveraged private sector, tax cuts as well as  other fiscal measures and infrastructure investments. But activity will remain below potential and the government deficit will greatly distend, says the OECD.

Van Eck announced its intent to launch a Market Vectors Poland ETF (PLND), which is expected to come out later this month, writes Don Dion for TheStreet. The fund will focus on small- and mid-cap companies, with an index made up of stocks that have a market cap of at least $150 million and daily trading averages of a minimum of $1 million. PLND’s most heavily weighted sectors are reported to have allocations of financials at 40%, energy at 14% and industrials at 11% within the fund’s portfolio.

Country-specific ETFs are useful in diversifying an international portfolio, or tracking short-term trends in international economies that would otherwise not be available to an average investor. However, investors should note that narrowly themed and emerging market ETFs have greater volatility.

While there currently isn’t a Poland single-country ETF, there are a selection of emerging market/frontier market ETFs that do have Poland as a large component. These types of region-specific ETFs also have the added benefit of spreading risk between the economic outcomes of countries included in the ETFs. (How to play Poland’s handsome recovery).

For more information on Poland, visit our Poland category.

• Claymore/BNY Mellon Frontier Markets (NYSEArca: FRN): up 55.7% year-to-date; Poland is 15.1%

• SPDR S&P Emerging Europe (NYSEArca: GUR): up 79.1% year-to-date; Poland is 12.2%

• iShares Emerging Markets Eastern Europe Index Fund (NYSEArca: ESR): up 14.7% since inception; Poland is 12.9%

Max Chen contributed to this article.

Holdings: The largest holdings include Gazprom, 18.1%; Lukoil Oil Company, 9.6%; Rosnett, 5.8%; and Sherbank Rossii, 5.2%.

Objective

The fund tracks the S&P European Emerging BMI Capped Index (STBMEECQ).

What You Should Know

• The top sector allocations in the fund are energy, 45.4%; financials, 22.9%; materials, 11.5% and telecommunications, 8.9%.
• The top countries in the fund are Russia, 65.2%; Turkey, 13.4%; Poland, 11.5%; Hungary, 5.3%; and the Czech Republic, 4.1%.
• The expense ratio is 0.59%.

The Latest News

• According to the World Bank, the post-crisis environment in Russia provided the necessary catalyst for reforms when it comes to the country’s structural constraints and weak domestic demand, writes Gleb Bryanski for Reuters. Without reforms, the World Bank believes Russia’s growth will remain sluggish. (Ways to play Russia’s recovery).
• The Turkish economy was constrained by exports and investments, which dropped 8.5% and 17.6% respectively, as well as a 5.3% decline in private consumption. The banking sector is well-capitalized but loan growth is decelerating, which could slow the recovery of private consumption and investment. High requirements for public sector borrowing may further limit credit for the private sector.
• The effects of the global economic crisis could be felt in Eastern Europe for some time, says one official from the European Bank for Reconstruction and Development (EBRD).
• The official notes that recovery may move faster in some areas than others; in Slovakia and the Czech Republic, improvements may be seen sooner rather than later.

For more stories about Eastern European economies, visit our Eastern Europe category.

According to the World Bank, the post-crisis environment in Russia provided the necessary catalyst for reforms when it comes to the country’s structural constraints and weak domestic demand, writes Gleb Bryanski for Reuters. Without reforms, the World Bank believes Russia’s growth will remain sluggish. (Ways to play Russia’s recovery).

Russia’s Central Bank is expected to continue to cut interest rates to ease lending, but the cost of lending still remains high. The Russian Central Bank is trying to dampen the appreciation of the ruble and will soon have to choose “between maintaining a competitive exchange rate for tradable industries and avoiding inflationary pressures,” says the World Bank.

A return of capital inflows to Russia is expected by the first quarter of 2010 as oil prices increase and the global outlook improves. Russia’s inflation rate will range between 9% and 10% in 2010, but stimulus policies may raise it further in the second quarter. The unemployment rates may also rise based on seasonal factors. (Russia’s potential stumbling block).

Prime Minister Vladimir Putin stated said the government will continue to enact measures aimed at boosting domestic demand, strengthening the banking system and decreasing the budget deficit, as stated in BusinessWeek.

According to the Economic Development Ministry, Russia’s GDP is projected to contract 8.5% for 2009. The economy grew 0.6% in the third quarter, signaling an end to their recession.

For more information on Russia, visit our Russia category.

• Market Vectors Russia ETF (NYSEArca: RSX): up 137.2% year-to-date

• iShares Emerging Markets Eastern Europe Index Fund (NYSEArca: ESR): up 5% in the last month; Russia is 75%

• SPDR S&P Emerging Europe (NYSEArca: GUR): up 81% year-to-date ; Russia is 65%

• Dow Jones Emerging Markets Energy Titans (NYSE: EEO): up 16.8% in the last three months; Russia is 36.3%

Max Chen contributed to this article.

Russia’s GDP is expected contract 7.5% this year, and the government is forecasting 2% growth in 2010 while many independent economists are estimating growth of as much as 5% next year, reports Jason Bush for Forbes. (Stumbling blocks for Russia’s growth).

Russia’s economy grew 0.6% in the third quarter from the previous three months, but GDP was 9.4% lower than last year’s levels, writes Nataliya Vasilyeva for BusinessWeek. The Economic Development Ministry stated that the improvements were attributed to less capital outflow and to companies replenishing stocks.

Manufacturing and agriculture have been the main industry drivers, with agricultural activity increasing by 10% and industrial production increasing by 5.1%. Retail sales diminished 9.9% on the year in September. (Four things going for Russia).

The downturn hit Russia hard for three primary  reasons, Bush at Forbes says. These are reasons to use caution when investing in Russia and to have an exit strategy in place. (How to follow trends).:

• One reason is oil prices – they plummeted, and Russia plummeted along with it. They recovered somewhat, and so did Russia.

• Another reason is their companies’ idiosyncrasies, which include holding copious stocks of inventory and engaging in cost-plus accounting, which means companies initially resist price cuts by reducing wages. These two reasons helped explain why Russia’s output plummeted early in the downturn. (Ways to play oil and Russia).

• Furthermore, Russia’s financial sector is still struggling and bad loans are expected to reach 20% by the end of the year.

For more information on Russia, visit our Russia category.

• Market Vectors Russia ETF (NYSEArca: RSX): up 119.9% year-to-date

• iShares Emerging Markets Eastern Europe Index Fund (NYSEArca: ESR): down 8.4% in the last week, recently launched; Russia is 75%

• SPDR S&P Emerging Europe (NYSEArca: GUR): up 68.5% year-to-date ; Russia is 65%

• Dow Jones Emerging Markets Energy Titans (NYSE: EEO): up 5.9% in the last three months; Russia is 36.3%

Max Chen contributed to this article.

The new iShares Emerging Markets Eastern Europe Index Fund (NYSEArca: ESR) has the following breakdown:

• Country weightings include: Russia 75%, Poland 13%, Czech Republic 6.4%, Hungary 6.1%.
• Sector allocation include: Energy 52%, Financials 16%, Materials 11%, Telecom 10%.

The fund’s largest allocations are in energy and Russia, with its two major holdings in Russia’s Gazprom, at 25%, and Lukoil, at 10%. Potential investors should be aware of higher risks, yet possible higher profits, involved with a fund that has a high percentage in any single company, writes Roger Nusbaum for TheStreet. The fund has an expense ratio of 0.72%. (More on Eastern Europe’s economy).

An alternative to iShares’s  new ETF is the SPDR S&P Emerging Europe (NYSEArca: GUR), which is currently up 88.4% year-to-date. GUR has an expense ratio of 0.59%.

• Country weightings include: Russia 65%, Turkey 14.8%, Poland 10.4%, Hungary 5.1%, Czech Republic 4.2%, U.S. 0.5%
• Sector allocation include: Energy 45.3%, Financials 22.9%, Materials 10.7%, Telecom Services 9.2%, Consumer Discretionary 3.4%, Industrials 3.0%, Utilities 2.7%, Health Care 1.2%, Consumer Staples 0.9%, Miscellaneous 0.4%, Info. Tech. 0.4%

New ETF provider Emerging Global Shares also has the Dow Jones Emerging Markets Energy Titans (NYSE: EEO):

• Country weightings include: Russia 36.3%, India 18.9%, China Offshore 16.3%, Brazil 9.5%, South Africa 6.8%, Thailand 4.2%, Chile 2.5%, Colombia 1.9%, Poland 1.6%, Hungary 0.9%.

Which ETF do you choose? It depends on the allocation you’re seeking and how much exposure to energy you’re seeking. GUR has a more even distribution among various sectors, but if you’d like a heavier weighting in energy, EEO and ESR may be worth some investigation, too. Be mindful, too, that some of these funds have heavy allocations to a single stock, which may increase volatility. (Four things going for Russia).

For more information on Eastern Europe, visit our Eastern Europe category.

Max Chen contributed to this article.

The International Monetary Fund (IMF) does not believe the emerging market economies in Eastern Europe will recover in the second half of 2009, according to The New York Times. Eastern Europe will miss out on a stronger rebound because of cross-border capital flows.

In the IMF report, the forecast for Emerging Eastern Europe GDP growth is 1.8% as a whole in 2010 after a 5.2% drop in 2009. Individually, the Baltics, Hungary and Bulgaria may see a milder recession while Poland and Turkey could see sizable gains. (Visit our emerging Europe category for more stories on these economies).

The area’s banking system is still troubled and outside countries have warned Eastern European Central Banks and governments to not rush withdrawing stimulus measures. The unemployment rate is also another major headache, with the IMF predicting a rise to 11.7% next year for the euro zone.

The SPDR S&P Emerging Europe (NYSEArca: GUR) has its heaviest allocation to the energy sector, with 44% of the weighting. Financials make up a smaller slice, with 22.5%, which should buffer the impact of any financial turmoil that emerges in the region. It’s also got heavy exposure to countries that are predicted to do well in the coming year. (Read more about Poland and Russia here).

• SPDR S&P Emerging Europe (NYSEArca: GUR): up 63.9% year-to-date; Russia is 63.1%; Turkey is 15.1% and Poland is 11.1%.

For more information on emerging European countries, visit our emerging Europe category.

Max Chen contributed to this article.

Frontier markets are not stable enough to be named “emerging,” but these markets do have more potential to deliver higher returns to compensate for the greater risk, remarks Will McClatchy ETFZone. Frontier markets are defined as suffering from extreme volatility, poor trading, corruption, dismal accounting and a tendency to expropriate foreign capital.

What’s so appealing about frontier investments? First, the fastest-growing countries are currently the ones that are “economically delayed.” Second, risk in frontier markets is greatly reduced when added in small amounts to a portfolio.

Some frontier market regions to consider include:

• Africa is a prime example of a frontier market. During the financial debacle, Africa did not suffer as much from the credit crunch since it was lightly leveraged. The continent also has a great amount of natural resources.
• States of the Persian Gulf and Middle East hare developing into emerging status. The oil-rich states are raking in the benefits of increasing wealth, transparency and infrastructure development.
• Eastern Europe, former Soviet satellite states and Asian countries do have some ready supply of natural resources, but some regions are corrupt and home to organized crime.
• Smaller Latin American countries like Bolivia, Ecuador and Peru are sometimes categorized as “frontier.” However, most Latin American ETFs are more weighted toward advanced economies, and single-country ETFs don’t cover all the nations.

A few of the frontier market ETFs out there include:

• Claymore/BNY Mellon Frontier Markets ETF (NYSEArca: FRN): up 42.7% year-to-date; expense ratio is 0.65%; country samplings include: Egypt, Colombia, Kazakhstan, Chile and Poland

• Market Vectors Gulf States ETF (NYSEArca: MES): up 18.2% year-to-date; expense ratio is 0.98%

• SPDR S&P Emerging Europe (NYSEArca: GUR): up 58.3% year-to-date; expense ratio is 0.6%; note that GUR has a high allocation to Russia

• Market Vectors Africa ETF (NYSEArca: AFK): up 32.2% year-to-date; expense ratio is 0.83%; country samplings include: South Africa, Nigeria, Morocco and Egypt

Fore more information on frontier markets, visit our frontier markets category.

Max Chen contributed to this article.

The Polish economy stepped lightly throughout the global recession because its economy was not as heavily invested in exports compared to its other European counterparts, remarks Carter Dougherty for The New York Times. As a result, the emerging economy has seen a few positive developments:

• Poland’s GDP increased by 1.1% in the second quarter by the same period year-over-year, a result well above the expected 0.5% growth, writes Polya Lesova for MarketWatch.
• The Polish zloty jumped 1% against the euro and 1.1% against the dollar on the good economic report.
• The Danske Bank expects the economy to grow between 1.0% and 1.5% for 2009.
• The Polish Central Bank kept interest rates at 3.5%, citing increase in retail sales and rise in economic sentiment as indicators signaling an improvement in the economy.
• Poland’s labor market remains strengthened by foreign investment. Many big-name global manufacturers are setting up shop in Poland, which has helped bolster the employment rate.

On the flip side, Ryszard Petru, chief economist at BRE Bank in Warsaw, estimates unemployment will hit 9.9% by the end of 2009, up from 7.1%. The Central Bank also warns that reduced lending, more notably to the corporate sector, may diminish overall economic growth.

While there currently isn’t a Poland single-country ETF, there are a selection of emerging market/frontier market ETFs that do have Poland as a large component. These types of region-specific ETFs also have the added benefit of spreading risk between the economic outcomes of countries included in the ETFs.

• Claymore/BNY Mellon Frontier Markets (FRN): up 35.6% year-to-date; Poland is 15.1%

• SPDR S&P Emerging Europe (GUR): up 46.6% year-to-date; Poland is 12.2%

For more information on emerging markets, visit our emerging market category.

Max Chen contributed to this article.

The IMF, European Union and Central Banks all helped in reducing Central and Eastern Europe’s liquidity issues, which stymied multiple national bankruptcy, cross-border banking collapse and region-wide contagion, writes Michael Winfrey for Reuters.

Investors are beginning to peruse the various countries, looking for new positions to take advantage on potentially good performers. However, there are still some risks:

• Latvia, Romania and Hungary are still discussing the finer details of their billion-euro rescue packages
• States that avoided bailouts are dealing with over-sized deficits, which could result in spending cuts and diminish future growth
• Unemployment can continue to rise for another year or more
• A fourth-quarter selloff in the U.S. stock markets could create another round of flight from risk around the globe

Many believe prospects for economic growth in emerging markets are better than those in the United States, but an investor should be aware that economic situations vary from country to country, remarks Sam Subramanian for iStockAnalyst.

A good way to hedge these risks is with an ETF that offers broad exposure to a range of countries. Instead of betting on individual countries, ETFs can help spread out the exposure a little more and reduce volatility and risk. Watch the trend lines in order to spot opportunities.

• SPDR S&P Emerging Europe (GUR): up 46.3% year-to-date

For more information on Emerging European countries, visit our Emerging Europe category.

Max Chen contributed to this article.

Some currencies in Eastern Europe are trading at new highs for this year, and the cost of insuring against sovereign-bond defaults has dropped as confidence about the global economy continues to grow. More and more investors seem willing to take on riskier assets.

On the flip side is lingering uncertainty about where the global economy is going, say Katie MArtin and Clare Connaghan for The Wall Street Journal. If it turns sharply negative, investors could lose their risk appetite and head for the exits.

Now that emerging Europe has departed from full-on crisis mode, the International Monetary Fund (IMF) is handing down more stringent requirements for monetary lending. The result would be a range of different deals in which the most needy countries will have to get their public deficits under control in order to receive funds. Michael Winfrey for Reuters reports that these measures are being taken because the immediate threat of regional collapse has faded and now the IMF can spend its time focusing on the unique issues of various countries.

• SPDR S&P Emerging Europe (GUR): up 35.4% year-to-date

For more stories about emerging Europe, visit our emerging markets category.