How to invest in Poland with an ETF

PLND - Market Vectors Poland ETF
At the end of November, Van Eck launched this new ETF, which is the first fund to give investors full exposure to Polish markets. Previously the ETF with the largest collection of Polish assets was Calymore's BNY Mellon Frontier Markets ETF (FRN), 16% of which were Poland securities.

The new ETF will consist of 26 Poland stocks, the majority being mid-cap and small-cap equities. Roughly 39% of the stocks are in the financial sector, 13% in the energy sector and another 11% in industrials.

While Poland is considered more of a frontier market than an emerging market, it's growth rate should not be ignored. And this new ETF may just what the doctor ordered. 

Market Vectors Poland ETF (PLND) is the first pure-play single-country ETF focusing on Poland for US investors.  PLND trades on the NYSE and expenses are capped at 0.76%

“The new Market Vectors ETF is very interesting and welcome development.  Until now, investors preferring index-based trading approach to Poland could only trade futures based on popular Warsaw Stock Exchange indices like WIG20, but it was rather difficult for foreigners.

“PLND makes it a lot easier to get exposure to the economy of the 9th largest country in Europe.  The Warsaw Stock Exchange in its current form started its operation in 1991 and currently has 377 companies listed.  I am looking forward to see how this ETF will work in practice considering sometimes limited liquidity of certain stocks traded on WSE.  I guess the fund will need to use futures traded on WSE that have better liquidity to address such shortcomings and to deliver the expected 95% correlation between fund’s performance and the index.

“Some may consider it a drawback that PLND tracks the proprietary Market Vectors Poland Index rather than the most popular (and known) Warsaw Stock Exchange WIG20 index, even though both indices have very similar constituents.

“Regarding risks, everything spelled out in the prospectus is certainly true, but I would not worry too much about the statement regarding local securities laws and shareholder rights because Poland is a part of European Union and E.U. law has precedence over national law now.  This provides a rather strong guarantee that there will not be any ‘unpredictable’ changes in laws, at least not ones that E.U. does not accept.”

As of November 24, 2009 the fund held 25 stocks, with the largest being Pko Bank Polski Sa  9.3%, Bank Pekao Sa 9.07%, KGHM Polska Miedz SA 8.2%, Telekomunikacja Polska Sa 6.2%, and Polski Koncern Naftowy Orlen 5.8%.

The sector breakdown is Financials 40.2%, Energy 13.6%, Industrials 11.0%, Consumer Staples 8.6%, Materials 7.8%, Telecommunications 6.8%, Consumer Discretionary 6.7%, Technology 4.1%, and Health Care 1.2%.