Two months after a tragic plane crash on Russian soil claimed the lives of Poland’s president and several top government officials, voters will head to the polls on Sunday to choose between two candidates with drastically different plans for the country’s future. Bronislaw Komorowski, a member of the pro-market Civic Platform party, maintains a moderate lead over Jaroslaw Kaczynski, the identical twin brother of the late president and leader of the conservative Law and Justice Party.
“Voters face a choice between two visions of the country’s future: a smaller state role and more rapid integration with the European Union, or more active government involvement in the economy and a more nationalist foreign policy,” writes Gordon Fairclough. If Komorowski wins, it could smooth the path for Prime Minister Donald Tusk’s plan to privatize state-owned companies, scale back pension programs, and raise the retirement age in an effort to cut the government’s budget deficit.
The socially conservative Kaczynski, on the other hand, favors an extension of the policies enacted by his brother Lech, including generous welfare programs. It is expected that a Komorowski victory would be cheered by investors, since such a scenario would expedite plans to cut Poland’s budget deficit, which currently stands at more than 7% of GDP.
Poland ETFs In Focus
Poland has emerged as an interesting investment opportunity; the world’s 18th largest economy was the only in the European Union that grew in 2009, and isn’t burdened by adoption of the euro currency. Because the country relies primarily on domestic consumption, Polish equities have been somewhat insulated from turmoil in the rest of the continent. With the country slated to choose between two very different candidates over the weekend, Poland ETFs figure to be in focus in early trading next week:
- Market Vectors Poland ETF (PLND): This ETF tracks the performance of the Market Vectors Poland Index, a benchmark consisting of about 25 companies either headquartered in Poland or deriving at least 50% of their revenues in Poland. PLND has a heavy tilt towards the financial sector, which accounts for nearly 40% of total assets.
- iShares MSCI Poland Investable Market Index Fund (EPOL): This recently-launched ETF tracks the performance of the MSCI Poland Investable Market Index, a benchmark that consists of about 60 individual holdings. Similar to PLND, EPOL has a heavy tilt towards financials; this sector accounts for more than 40% of assets. One big difference relative to PLND is the allocation given to the top holdings; EPOL’s largest holding accounts for about 15.5% of assets, while the biggest individual weighting in PLND is about half as much.
Look for both of these ETFs to be active on Monday following the Sunday elections. If Komorowski wins convincingly, both could get off to a good start. But if no party wins a majority, uncertainty over the country’s economic future could linger for a while longer.
Disclosure: No positions at time of writing.