Warsaw-traded shares are raising a few eyebrows among cross-border investors. In the year-to-date period, Polish equities have delivered gains in excess of 12% in US dollar terms. One reason is that allocators are more comfortable with the Law and Justice Party, despite the political cloud that has lingered since neo-conservative leadership took power in October 2015. But more importantly, GDP growth is stunning on a comparative basis. EU-wide momentum may trundle along at 1.5% this year; the figure in Poland is set to be more than double that rate. Indicative of the potential, economists were surprised by the strength of the manufacturing sector in January. Brexit has further bolstered Polish assets. Services jobs are shifting from the United Kingdom to Poland, while highly-skilled Poles are repatriating themselves to take advantage of the domestic labor market. ■
Our Vantage Point: The zloty may be undervalued, supporting export activity. The dovish central bank appears willing to tolerate the inflationary spillover. It may not raise interest rates until 2018.
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Image: Poland still uses the zloty, despite being a EU member state. Credit: Paolo77 at Can Stock Photo Inc.