S&P Dow Jones Indices has reclassified Poland as a developed economy, shifting its stocks out of emerging-market index funds ahead of a September 2027 reconstitution. The iShares MSCI Poland ETF has outperformed the S&P 500 over the past three years while trading at a far lower valuation, and investors point to the country's growth and export strength as the reason.
S&P Dow Jones Indices, a subsidiary of S&P Global, has reclassified Poland as a developed economy, upgrading it from emerging-market status. The change moves Polish stocks from the S&P Emerging BMI to the S&P Developed BMI when the index provider's reconstitution takes effect in September 2027.
Billions in fund flows shift categories
The reclassification means Polish stocks move to the $41.8 billion State Street SPDR Portfolio Developed World ex-US ETF from the $17.8 billion State Street SPDR Portfolio Emerging Markets ETF. That shift can draw in more U.S. investor money, because many buyers seeking international exposure prefer developed markets over emerging ones. But MSCI still classifies Poland as an emerging market, a split that Cullen Rogers, chief investment officer of Wedbush Advisors, described as the source of the opportunity.
According to MarketWatch: "I think Poland is a catch-up story," Rogers said, describing Poland as a former manufacturing hub for Germany that has matured into a developed economy with fewer regulatory constraints than most developed markets.
A cheaper alternative to the S&P 500
The iShares MSCI Poland ETF has more than doubled the total return of the SPDR S&P 500 ETF Trust over the past three years, yet it trades far cheaper. Its portfolio carries a forward price/earnings ratio of 11.7, which is 57% of the forward P/E of 19.5 for the S&P 500, according to FactSet.
Rogers called Poland an under-owned economy, noting its stock market is valued at about 30% of the country's GDP, against 50% for Germany and close to 100% for the U.S.
Growth backdrop and stock picks
Strategists at BCA wrote that Poland's real GDP has more than doubled since the country joined the European Union in 2004, and cited accelerating funding through the E.U.'s Recovery and Resilience Facility as a tailwind. Exports make up about 50% of Poland's GDP, per BCA's estimate, supporting a tech and gaming sector that includes CD Projekt Red, Playway and the Warsaw Stock Exchange. That exchange's forward P/E has risen to 16.1 from eight times earnings when Robotti first invested, according to Spencer Cibelli, a senior investment associate at the firm.
Sources: MarketWatch, S&P Dow Jones Indices
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