iShares MSCI Poland ETF (EPOL): Good European Diversified Allocation Case, but One Has to Proceed with Caution!
The iShares MSCI Poland ETF (EPOL) is an ETF with slightly abnormally elevated management costs because it focuses exclusively on value-weighted exposure to the Polish market. The expense ratio is 0.59%, which is a reasonable value considering the friction associated with the instrument's FX exposure.
Although this is a mature market and a European success story, there are still some issues to be aware of: particularly, there are some unquantifiable risks in the Polish banking sector due to some foreign currency borrowings and related legal risks. The performance of the Polish zloty is very important for USD exposure. Inflation in Poland was lower than expected, but still above 6% due to supply chain issues.
The central bank's unexpected shift to a dovish stance appears to have little support among local and international economists, and is inconsistent with the overall inflationary regime in developed markets around the world. EPOL has significant financial exposure, with PKO (PSZKY) having around 13% exposure.
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