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.

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.

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.

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".

Recommended

Ewan Markson-Brown: the joy of small companies
Investment strategy

Ewan Markson-Brown: the joy of small companies

Merryn talks to Ewan Markson-Brown of Crux Asset Management about why when it comes to emerging markets, he much prefers to invest in micro- and small…
3 Dec 2021
Forget socialism – shareholder capitalism is delivering
Economy

Forget socialism – shareholder capitalism is delivering

Many Millennials say they would prefer to live in a socialist society. That's understandable. But while socialism promises everyone ownership and powe…
3 Dec 2021
In praise of capitalism, the noble path that leads to profits
Economy

In praise of capitalism, the noble path that leads to profits

Contrary to modern myth, profits are not always a result of greed, but a signal of virtue. Stuart Watkins reports.
3 Dec 2021
It’s official – inflation is no longer transitory
Inflation

It’s official – inflation is no longer transitory

America’s central bank has had a change of heart on inflation, and wants to retire the word “transitory”. John Stepek explains what that means for mar…
1 Dec 2021

Most Popular

Three safe bets on the growing online gambling sector
Share tips

Three safe bets on the growing online gambling sector

Professional investor Aaron Fischer, creator of the Fischer Sports Betting and iGaming ETF, picks three of his favourite online gambling stocks.
29 Nov 2021
Making sense of the new minimum pension age rules
Pensions

Making sense of the new minimum pension age rules

The rules surrounding the minimum age at which you can start tapping into your retirement savings have been tweaked, but are still confusing. David Pr…
23 Nov 2021
Bubbles grow in global property markets as house prices continue to rise
Property

Bubbles grow in global property markets as house prices continue to rise

House prices grew by 6% in the year to mid-2021 in 25 global cities, with the German property market in particular showing signs of overheating.
3 Dec 2021