Eastern Europe ETFs: Expecting Increased Inflows Later This Year

Includes: EPOL, ESR, GUR
by: Tom Lydon

Investment inflows into the fast-growing economies of Eastern Europe and their exchange traded funds may have slowed last year and into this year, but those in the know suggest that this isn’t going to be the case for long.

Central and Eastern European countries may attract more foreign direct investment this year after a sluggish 2009, with only about half the investment seen in previous months. Peter Laca for Bloomberg reports that Eastern Europe, which relies on foreign investment to drive its economic convergence with more developed European Union nations, is in recovery mode after its worst recession in two decades.

Global trends are indicating that FDI will moderately increase their flows to keep growth stimulated. But how keen are investors right now to invest in a region that many fear will feel a contagion effect from the eurozone?

For instance, two weeks ago, Hungary shook the region when politicians made negative comments about the country’s debt situation.

The situation in Eastern Europe has become serious enough to dent returns, as two broad ETFs that track the region have made clear. Both iShares MSCI Emerging Markets Eastern Europe (NYSEArca: ESR) and SPDR S&P Emerging Europe (NYSEArca: GUR) are down year-to-date. Investors are cutting back on risk, and their trepidation toward the region is symbolic of this.

  • iShares MSCI Emerging Markets Eastern Europe (NYSEArca: ESR)
  • SPDR S&P Emerging Europe (NYSEArca: GUR)
  • iShares MSCI Poland Investable Market Index Fund (NYSEArca: EPOL)

Tisha Guerrero contributed to this article.