ETF Trends
ETF Trends

Investors looking for an emerging markets rebound in the back half of this 2013 should consider those ETFs that are already exhibiting signs of strength. The iShares MSCI Poland Capped ETF (NYSEArca: EPOL) and the Market Vectors Poland ETF (NYSEArca: PLND) need to be on that list.

July was a mixed month for the broader emerging markets ETF group, but several emerging markets funds appeared on the 10-worst performers list. ETFs with exposure to India, Chile and Peru were among the July emerging markets disappointments, but the same cannot be said of EPOL and PLND. [July ETF Performance Report]

Last month, EPOL, the larger of the two Poland ETFs, and PLND each gained more than 9%. Since the Federal Reserve began reassuring investors in late June that interest rates will remain low for another few years and that quantitative easing tapering is not as imminent as previously thought, EPOL and PLND have gained about 11.4%. [Poland ETFs Test 50-Day Moving Averages]

The pair gained an average of 4.8% last week, running higher on the back of constructive economic data that indicates the Polish economy, the European Union’s largest eastern economy, is gaining some steam. Poland’s purchasing managers index climbed to 51.1 in July from 49.3 in June, getting back into expansion territory. That was the strongest reading since January 2012 and above the median estimate of 50 by 17 economists, reports Piotr Skolimowski for Bloomberg.

In late July, Poland’s Central Statistical Office said retail sales rose 1.8%, easily topping expectations for a 1.1% increase. While Poland’s central bank confirmed in July its rate-cutting efforts that have brought rates there to a record low are complete for now, the government is expanding stimulative measures to combat its weakest economic growth rate in 16 years.

The government will allow the budget deficit to rise to $4.95 billion, or about 1% of GDP. The expectation is that such efforts combined with recent rate cuts will begin bearing fruit later this year and in early 2014.

Such measures are critical for Poland’s economy, which is more internally focused and less dependent on exports than are other emerging economies, factors that helped the nation become the only member of the European Union to dodge the recession since 2009.

Of the two, Poland ETFs, PLND is more exposed to the consumer with a combined 14.7% weight to staples and discretionary names. EPOL’s combined weight to those two sectors is just over half that of PLND’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.