Exchange traded funds that track Polish markets are among the best performing country-specific ETFs of the year as strong domestic consumption helped lift the economy and a strengthening zloty currency supported further investment interest.
Year-to-date, the VanEck Vectors Poland ETF (NYSEArca: PLND) gained 36.5% and iShares MSCI Poland Capped ETF (NYSEArca: EPOL) rose 34.5%.
Supporting the momentum in the Polish markets, Poland’s economy grew at an annual rate of 4% for the first three months of the year, compared to 2.5% for the previous quarter, and the drop in investment that weighed on economic expansion through 2016 all but disappeared, reports Bartosz Chmielewski and Marcin Goettig for Reuters.
First quarter growth revealed total consumption added 3.2 percentage points to the annual growth rate as private consumption rose 4.7% year-over-year, its fastest pace in eight years, on a record low level of unemployment and new child benefit launched by the government last year.
Furthermore, investments interest is rebounding, only falling by 0.4% year-over-year, compared to a decrease of 9.8% in the previous quarter. In seasonally adjusted terms, investments rose 1.0%.
“Investment is returning to the growth path,” bank PKO BP said in a note. “The dynamics of investment should gradually rise over the remaining part of the year.”
Investments declined last year partly due to a slowdown in the inflow of European Union funds. However, a Polish deputy economy minister said earlier this year that the economy could receive a “very strong” impulse from EU funds.
“Despite negative statistical base effects, economic growth in the second quarter should be maintained at 4 percent and this will take place thanks to investment demand,” economists at mBank said in a note.
Further supporting the investment case, the Polish zloty currency has appreciated about 13.7% against the U.S. dollar since the mid-December lows.
PLND and EPOL do not hedge their currency risks so an appreciating zloty has helped bolster U.S.-dollar denominated returns.
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