Poland ETFs found renewed strength Monday after Standard & Poor’s surprise credit rating outlook upgrade.
On Monday, the iShares MSCI Poland Capped ETF (NYSEArca: EPOL) gained 4.2% and VanEck Vectors Poland ETF (NYSEArca: PLND) rose 3.4%. Nevertheless, EPOL is still down 5.5% and PLND is 5.7% lower year-to-date.
Polish markets stood out among European stocks after a surprise upgrade from credit rating firm S&P. Some market observers feared a downgrade of the BBB+ rating after the country’s first downgrade since communism fell from the S&P back in January, Reuters reports.
Poland experienced a downgrade earlier this year due to an increase in government spending and a cut in the retirement age. The government administration imposed new taxes on banks, rolled out a program of child benefits and pledged to raise tax-free income, which would all increase Poland’s budget deficit beyond Eurozone limits.
The ratings agency, though, raised its outlook on Poland’s credit rating to stable from negative, stating it was no longer worried that the Polish government would try to undermine the independence of the central bank.
Nevertheless, Poland, along with other emerging markets, remain vulnerable in the face of the uncertain European political environment and prospects of rising interest rates in the U.S., which would keep pressure on the developing markets and the Polish zloty currency, according to Piotr Poplawski, senior economist at ING BSK.
“This environment is still rather negative for the zloty although it may perform a little bit better than other currencies in the region thanks to S&P’s outlook hike,” Poplawski added.
Potential investors can gain exposure to the Polish markets through the country-specific EPOL and PLND. Both funds include heavy tilts toward financials and energy sectors. However, EPOL includes a larger weight toward materials while PLND includes a slightly larger position in consumer discretionary and utilities.
EPOL comes with a 0.62% expense ratio and PLND has a slightly lower 0.60% expense ratio.
Potential income-minded investors may also like to know that EPOL shows a 3.61% 30-day SEC yield and PLND has a 3.37% 30-day SEC yield.
For more information on the Polish markets, visit our Poland category.