Eastern European markets and related exchange traded funds could also indirectly benefit from the European Central Bank’s quantitative easing program as the stimulus could provide some spillover effects for neighboring states.
For eastern European exposure, investors can monitor the iShares MSCI Emerging Markets Eastern Europe Index Fund ETF (NYSEArca: ESR) and SPDR S&P Emerging Europe ETF (NYSEArca: GUR), which have increased 6.6% and 6.2% over the past week, respectively. [ECB Stimulus to Fuel Emerging Market ETFs]
However, potential investors should be aware that the ETFs have significant exposure to Russia. ESR has a heavier tilt toward Russia at 64.9%, followed by Poland 27.7%, the Czech Republic 3.6% and Hugary 3.3%. GUR includes a 41.1% weight toward Russia, followed by Turkey 26.4% and Poland 19.1%, Greece 6.1%, Czech Republic 2.6% and Hungary 2.6%.
These eastern European countries will indirectly benefit from ECB’s move to promote cross-border lending and foster growth in the Eurzone, their main trading partner, Bloomberg reports.
“This will cause inflationary expectations to go out of the deflationary trap and finally create growth, which is good for central and eastern Europe because it has a major trade link with the euro zone” Michael Ganske, a manager at Rogge Global Partners Plc, said in the Bloomberg article. “Poland, Hungary and the Czech Republic have highly synchronized business cycles with the euro zone.”
For instance, Russia has been a major trading partner to the Eurozone, providing a significant chunk of oil imports to the euro-bloc.
The Market Vectors Russia ETF (NYSEArca: RSX), which has been been one of the worst performing emerging market ETFs in 2014, jumped 11.3% over the past week.