Advertisement

Poland bids farewell to investors

Not long ago, Poland was still the darling of emerging markets. Not so much anymore, says Andrew Van Sickle.

16-6-15-Poland-1200
Poland: populist cheer heralds economic gloom

Not long ago, Poland was still "the darling of emerging markets", says Shahzad Hasan of Allianz Global Investors. But he has "not been impressed" by recent developments, he told the FT. He's not alone. Since the election of the Law and Justice party last October, one ETF tracking the stockmarket has lost a third of its assets. The currency has plummeted and the local WIG 20 index of blue-chip companies has lost over a fifth in the past year.

Advertisement - Article continues below

The new government "has developed a reputation for being populist, nationalist, and perhaps authoritarian", says The Wall Street Journal's Adam O'Neal. Democratic institutions are being "squeezed": party functionaries now oversee the media and have the power to sack journalists. The European Commission has issued an unprecedented opinion saying the government is endangering the rule of law, adds Aliya Ram in the FT.

On the economic front, populist promises, including lowering the retirement age, money for families with more than one child, and raising the tax-free threshold on income tax, are the order of the day. All this is to be paid for by taxing bank assets, insurers and large retailers. Not coincidentally, these tend to have foreign owners, which has darkened the outlook for further foreign investment.

Advertisement
Advertisement - Article continues below

Poland had been a model of pro-market reforms and rapid development since the fall of Communism. It is Europe's sixth-biggest economy, worth around $530bn, whose growth has easily outstripped the rest of the continent's over the last ten years. But now it seems to be following the trail blazed by the self-proclaimed "illiberal democracy" of Hungary's prime minister, Viktor Orban, says the FT's Henry Foy.

Advertisement - Article continues below

Confidence took another knock this month when the deputy prime minister confirmed the government's new nationalist economic policy in an interview entitled "Farewell to Neoliberalism". It may be a long time before investors come back.

Peruvian stocks top global table

Foreign investment in gold and copper mining has allowed Peru to open two new mines this year. Over a decade of political stability and sensible fiscal and monetary policies has fuelled international confidence and underpinned this positive backdrop. Peru, concludes Joaquin Cottani of Standard & Poor's Global, is "an economic success story".

Dollar reaches a plateau

"A Fed on hold takes away support for the dollar," says Fiera Capital Corp's Jonathan Lewis. The weak May jobs report has pushed back thecentral bank's next interest-rate move. Instead of moving this summer, it may now even wait until November's presidential election is over.

The gap between US and European or Japanese rates remains high, but this has surely been factored in by now. Moreover, the greenback's strong run over the past few years it gained 40% between 2008 and late 2015 has tempered growth. That in turn has helped make markets more nervous about rate rises, so the Fed is now all the more cautious, as Ashmore Investment Management's Jan Dehn told the FT. The upshot, reckons Dehn, is that the greenback has "reached a plateau".

Advertisement
Advertisement

Recommended

Visit/investments/stockmarkets/600688/bullish-investors-return-to-emerging-markets
Stockmarkets

Bullish investors return to emerging markets

The ink had barely dried on the US-China trade deal before the bulls began pouring into emerging markets.
27 Jan 2020
Visit/519872/beware-the-hidden-risks-when-investing-in-emerging-markets
Investment strategy

Beware the hidden risks when investing in emerging markets

Emerging markets look cheap compared with developed countries, but earnings may be less trustworthy.
23 Dec 2019
Visit/519858/how-long-can-the-good-times-roll
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Visit/517395/emerging-markets-buy-when-the-news-is-bad
Emerging markets

Emerging markets: buy when the news is bad

Emerging markets are being squeezed by local turmoil and by more general factors. But bad news can spell opportunity for investors.
5 Nov 2019

Most Popular

Visit/investments/property/601606/house-prices-crash-uk-property-prices-falling-where-next
Property

House price crash: UK property prices are falling – so where next?

With UK property prices falling for the first time in eight years, are we about to see a house price crash? John Stepek looks at what’s behind the sli…
2 Jul 2020
Visit/economy/inflation/601584/the-end-of-the-bond-bull-market-and-the-return-of-inflation
Inflation

The end of the bond bull market and the return of inflation

Central bank stimulus, surging post-lockdown demand and the end of the 40-year bond bull market. It all points to inflation, says John Stepek. Here’s …
30 Jun 2020
Visit/investments/stockmarkets/601611/nasdaq-all-time-high-markets-and-the-real-economy
Stockmarkets

How can markets hit new record highs when the economy is in such a mess?

Despite the world being in the midst of a global pandemic, America's Nasdaq stock index just hit an all-time high. And it's not the only index on a bu…
3 Jul 2020