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Poland Sell-Off Viewed as Opportunity for Hedge Funds

Jul 15, 2013
Joey Peters

Reuters reported today that certain hedge fund managers are betting against Poland's sovereign bonds and currency to take advantage of emerging market sell-offs and slowing overall domestic growth. Poland, a top pick for foreign investors as the European Union's biggest ex-communist country, is considered a star of new EU membership base, per the article.

Affected by an early May emerging market sell-off, driven by concerns about the U.S. central bank winding down its easy money policies and a slowdown in Chinese growth, Slower Polish growth has also contributed to sending the zloty lower and yields higher.

According to the article, there's belief among hedge fund managers the situation will further deteriorate along with bonds. Morgan Stanley ranks Poland second after Mexico in a list of countries that have received the highest inflows into their government bonds since the second quarter of 2009 as a share of GDP.

The finance ministry's data show that foreign investors' bond holdings have been rising steadily in the past months to hit a record high of 207 billion zlotys ($62.25 billion) at the end of April, a move that helped the zloty remain stable for a nearly a year.

But Poland's bonds and the currency, like other emerging market assets, have been hit hard by concerns over how soon the U.S. Federal Reserve will begin reducing its stimulus program, which sent their yields to record-lows just a month ago.

Polish officials contend they've noticed portfolio capital outflow but nothing of significance - adding there's been a normalization of the country' bond curve and subsequent normalization to the overall market, the articles states.

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