Should You Invest in a Poland ETF?

ETF

In 2012, an article informed us of the addition of ETFs on the Warsaw Stock Exchange (WSE) market, although on a limited basis. By then, the ETFs global market was worth $1.1 trillion, and as investors gained interest in the exchange-traded funds, the main question was whether it was worth investing in a Poland ETF or not. After all, Poland has been regarded among the largest economies in eastern and central Europe; it has an active capital market and stable banking sector that put it in the lead compared to other countries. That being said, let’s tell you everything you need to know about investing in Poland ETF.

Why Poland ETFs Were Considered Great Investments

Forbes gave a few reasons why you might consider investing in a Poland ETF. The article was published in 2014 when the Poland ETF (EPOL) was attractive to investors based on several reasons. According to Forbes, the EPOL was well-positioned, and the European Central Bank’s accommodative monetary policies made it possible for foreign investors to view the stimulus announcements as incentives to invest in the country. Besides, the monetary policy encouraged lending and fueled economic growth.

Further, there was the issue of the ETF being undervalued because compared to the others within the European market, the EPOL was relatively cheaper. By then, the price/earnings ratio of 17.76 was far below the Eurozone’s 22.09 making the EPOL quite bullish for investors interested in the foreign market investment. Finally, the $30 per share was appealing to long-term investors who had observed an upward trend in the share price since mid-2012.

Those who heeded the advice had reasons to smile because, in 2017, the EPOL and the VanEck Vectors Poland ETF (PLND) were listed as two of the best-performing single-country emerging markets ETFs that year. By then, they were up an average of 45%, but financial analysts expected doom in the future for the eastern European economy block that was not getting along well with the European Union (EU.) According to ETF Trends, the tensions that had escalated between Poland and the European Commission had started in 2016. In 2017, they were in the last stage.

The rift was regarding the Supreme Court judges, and Poland was warned that if it maintained its ground, then the Commission would be forced to retaliate. Luckily, the Commission’s move would only be limited. It had no power to implement sanctions; hence Poland would remain attractive to investors; even Hungary was adamant about standing behind it. This is far from Venezuela’s case, where the US sanctions have made it quite a risky country to consider investing in, not only in ETFs but even in other foreign direct investment forms.

Poland ETFs Still Are Worthy Investments

Before you dismiss the above information that the recommendation was in the past, you will be surprised to learn that Poland is still regarded as worthy of rounding out your portfolio. The Balance (https://www.thebalance.com/a-guide-to-investing-in-poland-1979028) reported in 2019 that the country was the sixth-largest economy in the European Union and one of the fastest-growing. Its GDP had been growing steadily at a rate of 3% annually, and even when other countries in the European Union were affected by the European Sovereign Debt Crisis, Poland was the only one that stood firm. Its GDP growth remained unshaken through it all because it preferred depreciating its currency.

Among the many attractions to the country’s economy is the high economic growth rate that is well above the neighboring countries’; Poland’s rate is 3.5 %. With the unemployment rate remaining far below the European average and a ready export market, the Polish economy has attracted many foreign investors. However, of all foreign investments, Poland ETFs remain the easiest way of investing in Poland. EPOL is still regarded as the best option for international investors who want instant diversification in a single US-traded security.

As with any other country whose stock exchange provides the option of investing in ETFs, if you feel that Poland ETFs are not something you want to gamble with, you might want to consider the ADRs. However, you should note that unlike ETFs that are highly liquid, ADRs are relatively illiquid and pose more risks. Therefore, even if you believe in high-risk, high-reward, sometimes being a bit risk-averse could protect your investments.

What are the Benefits and Risks of Investing in Poland?

On LinkedIn, you will find a satirical article on the reasons why you should never invest in Poland while, in fact, they are incentives to push you to think about getting a stake in the nation’s robust economy. Poland is flaunted as one of the most favorable countries in the European Union due to its location. It has an excellent infrastructure with communication routes that provide an avenue through which to exports their goods to all European countries, thus have a broad consumer reach.

As mentioned earlier, regarding the country being able to weather the storm because it depreciated its currency, Poland’s independent currency enables it to remain quite competitive within the European Union. With that in mind, you can rest assured that your investment is safe no matter what happens, especially with the European Union so keen on attracting foreign investors that it allocates the country with massive sums of money. If Poland adopted the common currency used in the Eurozone, it would affect the bonds and equity performance, making your ETF investment risky.

While the country may boast of adequate infrastructure encouraging exports, you should note that it mainly exports to and imports from Germany. That being said, should there ever be a rift between the two countries, Poland would be left in the dark. Luckily, international investors do not have to worry about the country’s political stability; Poland has remained stable, enabling it to catch up with the Western economy.

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