Poland ETFs Jump After Dodging Credit Downgrade

Polish equities and country-specific exchange traded funds rebounded Monday after Moody’s confirmed the rating for the emerging market, assuaging fears that the ratings agency would follow Standard and Poor’s credit cut.

On Monday, the iShares MSCI Poland Capped ETF (NYSEArca: EPOL) gained 3.5% and Market Vectors Poland ETF (NYSEArca: PLND) rose 3.4%. Monday’s bounce is a welcomed relief after EPOL declined 9.3% and EPOl fell 9.4% over the past month.

“It’s a relief rally,” Luis Costa, head of CEEMEA debt and FX strategy at Citi, told Reuters. “Again we are seeing rating agencies showing a big distortion in how they see credit risk.”

The Polish zloty currency and equities markets bounced after Poland avoided a ratings cut by Moody’s, reports Claire Milhench for Reuters.

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The zloty, which had been depreciating over two-and-a-half months, appreciated almost 1% on Moody’s decision. The stronger zloty also helped support EPOL and PLND, which do not hedge their currency risks – a stronger foreign currency means that returns are augmented when converted to U.S. dollar terms.

Costa also argued that the zloty could continue to appreciate after a build-up of short positions ahead of the ratings review.