Bloomberg News

BlackRock Sees Polish Zloty and Bonds as ‘Sweet Spots’ in Europe

March 02, 2012

The Polish zloty and government bonds are attractive as strong economic growth makes the country one of the “sweet spots” in Europe, according to BlackRock Inc. (BLK)’s fund manager Beata Harasim.

The zloty is “fundamentally cheap” and a better investment than the Hungarian forint, the Czech koruna and the currencies of the Nordic region, according to Harasim, who helps oversee 27 billion euros ($35.8 billion) in European fixed- income assets for the world’s biggest money manager. Poland’s 10-year domestic bonds offer “good value” in the medium- and long-term, she said.

Fuelled by long-term liquidity from the European Central Bank, which eased tensions in the euro region’s debt crisis, and Poland’s resilient economy, the zloty appreciated 11 percent against the dollar this year, the second-best performance among more than 170 currencies tracked by Bloomberg. Poland’s 10-year bond yield hit a 16-month low of 5.45 yesterday, as the statistics office said gross domestic product grew 4.3 percent in the fourth quarter, six times the EU average.

“Poland will continue to benefit from domestic demand and higher investment, so we see it as one of the sweet spots in Europe,” Harasim said by phone from London yesterday. The country’s outlook “still looks attractive compared to the rest of the region as well as other emerging markets.”

Growth Magnet

The currency’s rally marks a turnaround from last year when the zloty had its steepest decline since 2008. It gained 8.8 percent against the euro this year, boosting returns on domestic bonds to 11.4 percent in euro terms, the third-best performance from the 26 sovereign indexes compiled by the European Federation of Financial Analyst Societies and Bloomberg.

Poland’s economic growth, compared with stalled growth in western Europe, has helped lure international investors to its local currency bonds. Their holdings rose to a record 159.6 billion zloty ($52 billion) in January, or 31.8 percent of the outstanding amount, the Finance Ministry said on Feb. 29.

While “we find Polish bonds attractive in the long-term compared to other European markets” there are “plenty of short-term risks, though, including heavy foreign positioning on the local market,” Harasim said.

Short-Term Volatility

The zloty may remain volatile in the short-term as investors “focus on the developments in Europe” and the rally has brought the currency “closer to its long-term fair value,” she said. The Polish currency advanced to the strongest intraday level in almost seven months at 4.0958 per euro earlier today. It weakened 0.1 percent to 4.1074 versus the European currency as of 2:17 p.m. in Warsaw.

Poland’s economic growth has prompted central bankers to say interest-rate increases can’t be ruled out, according to the minutes of the Feb. 8 central bank meeting. Poland has kept the benchmark interest rate at 4.5 percent since June, after raising it by 1 percentage point in the first half of last year.

“Polish central bankers have been very hawkish recently, which means that the yields on two-and three-year bonds should remain anchored in the coming months,” Harasim said. “I expect further strong buying of longer-dated bonds from foreign investors, considering the stable economic and fiscal situation, which means the curve may continue to flatten.”

To contact the reporter on this story: Piotr Skolimowski in Warsaw at

To contact the editor responsible for this story: Gavin Serkin at

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