Polish Stocks Rise as Emerging-Market Optimism Eclipses Anxiety

  • WIG20 Index rises most in eastern Europe after Turkey
  • Half of stocks gain at least 1 percent, zloty near 6-week high

Polish stocks surged to a one-month high as concerns subsided about political risk and the impact of Britain’s vote to leave the European Union amid accelerating inflows of investment to emerging markets.

The benchmark WIG20 index rose 1.2 percent by 3 p.m. in Warsaw, the biggest gain in eastern Europe after Turkey, as half of the stocks in the gauge climbed at least 1 percent. Eurocash SA, the country’s largest distributor of non-durable consumer goods headed for its longest winning streak in four years while the zloty traded just below a six-week high against the euro.

Polish stocks have underperformed developing-country peers this year following a surprise downgrade by S&P Global Ratings in January and fears that plans to reform the pensions system would amount to nationalization. Those concerns have subsided since the government stated it plans to leave 75 percent of retirement savings in private hands. As the largest of the European Union’s former communist members, it has also benefited from rising investor enthusiasm for emerging markets.

"With more clarity on the pension fund plans, a layer of uncertainty that had been causing under performance has now disappeared," said Gyorgy Palfi, a money manager who helps oversee 3 billion euros ($3.29 billion) at Aegon NV’s Hungarian fund unit. Palfi said he was upbeat about stocks in central eastern Europe, but prefers Hungarian and Czech equity to Poland. "Poland is benefiting again from global emerging-market inflows."

Emerging Inflows

The country may be benefiting from investors taking money out of Turkey where they see heightened political risk since a failed coup attempt on June 15, according to Palfi. Capital inflows to developing equity and debt funds grew at their fastest weekly rate since September 2013 in the seven days ending July 15, according to data from the Institute of International Finance.

Concerns are also easing over the impact on Polish companies from the U.K.’s decision to leave the EU, according to Dariusz Gorski, an analyst at Bank Zachodni WBK SA.

"It may now seem that the devil is not so black as it was painted,” he said. "Now the outlook seems less frightening."

Before it's here, it's on the Bloomberg Terminal.