New York-based Van Eck launched on Wednesday the Market Vectors Poland ETF (PLND), a fund that will track the 26-company Market Vectors Poland Index. PLND will trade on the NYSE Arca Exchange and charge an expense ratio of 76 basis points. Unlike most single-country international ETFs, which tend to be dominated by holdings in multi-national mega-cap companies, PLND offers exposure to companies of all sizes: according to its fact sheet, 41% of the underlying index is composed of companies with a market capitalization greater than $5 billion, with almost 50% in mid-caps.
Investing In Poland
Poland is the world’s largest 18th largest economy by 2008 GDP, making it surprising that there hasn’t been a pure play ETF prior to PLND. The void is even more confusing considering that #43 (Chile – ECH), #44 (Vietnam – VNM), and #50 (Israel – EIS) on the list are the subjects of country-specific ETFs. Last month, we included a Poland ETF among our list of Ten ETFs That Don’t Exist, But Should, citing the European country as a “shining example of a country that successfully transitioned from a centrally-planned economy to a capitalist market-based economy, thanks in large part to aggressive policies implemented since the fall of communism.”
While Poland’s economy certainly faces some hurdles. Its adoption of the euro has been shelved due to a failure to meet entry requirements set forth by the EU, and a once ambitious government has seen several initiatives sputter. Poland’s public debt could breach the threshold set by Polish law by exceeding 55% of GDP next year. Prime Minister Donald Tusk is now focusing on more manageable domestic agenda items, such as improving transportation infrastructure, increasing internet access, and gearing up for the 2012 European soccer championship.
Despite these obstacles, there are some reasons to be bullish on Poland. “Poland is the largest and fastest growing economy in Central and Eastern Europe,” said Jan van Eck, principal of Van Eck Global. “Poland’s economy has recently surpassed Belgium and Sweden and is one of the only economies in the CCE region to show positive growth this year.”
Poland’s local economy accounts for approximately 70% of GDP, allowing the country to come through the recent recession unscathed, at least relative to more export-dependent countries. Poland also has one of the lowest corporate tax rates in Europe and and a young, educated workforce, making the country an ideal location for multi-national firms looking to expand their reach into Europe.
Van Eck has become the leading issuer of country-specific emerging market ETFs, as PLND joins several other Van Eck ETFs targeting emerging and frontier economies. The Russia ETF (RSX), Africa ETF (AFK), Indonesia (IDX), and Vietnam (VNM) have all seen some success, accumulating more than $1.5 billion in AUM in aggregate. While all of these countries are included in more broad-based emerging markets ETFs, their allocations in these funds are generally limited.
For more on the Poland ETF and the economy of Poland, see Van Eck’s The Investment Case For Poland (PDF).
Disclosure: No positions at time of writing.