There has been a lot of gloomy news coming out of Poland over the last few months, but taking a look at markets for bonds and investment properties, the country is still something of a magnet for investors.
Earlier this week, Poland sold a €1bn six-year eurobond issue that was oversubscribed at €1.9bn and yielded 1.705 per cent, the lowest ever.
Simon Quijano-Evans of ING Bank noted that the result:
… shows the search for yield continues unabated (apparently large CenBanks demand too at 26% of total, with most demand from Europe and Asia), allowing a record low yield and a spread of mid-swap+65bp (on a relative basis, tight vs regional peers in our view).
Tuesday’s sale comes atop a long bull run in Polish, and more broadly CEE, bonds. Erste Bank said that:
Poland sold a record USD 12.1 bn of foreign currency bonds last year, second only to China in the bond issuer league tables, and had already secured 75% of its 2013 foreign currency needs (EUR 6.5 bn) in December 2012.
The reason is that in an era of ultra-low interest rates, even the low yields in Polish debt are a fairly attractive proposition, especially coming from a well-regarded government, says Nicholas Spiro of Spiro Sovereign Strategies.
The same attitude that has fixed income investors shifting money into Poland also applies to commercial real estate. A new report by Cushman & Wakefield, the real estate firm, finds that Poland was by far the most attractive CEE destination, accounting for three-quarters of investment activity in the region.
For 2012, the whole of the CEE saw €3.7bn in investment, down 59 per cent compared to 2011. Of that, the Polish market accounted for €2.8bn, up 8 per cent over the previous year.
Charles Taylor, a partner at Cushman and Wakefield noted that:
Despite investment volumes bouncing back strongly in Q4, driven by increased activity in Poland, this was insufficient to counter a lacklustre performance right across the CE region during the first 9 months. That said, we now see continuing momentum in Poland and expect activity to step up in the Czech Republic. We forecast volumes in the region to be marginally ahead in 2013, with Poland continuing to be the clear favourite.
German investors were the most active in the region, accounting for almost a third of investments, followed by Americans with 20 per cent and the French with 14 per cent.
Although Poland’s growth has slowed dramatically from the 4.3 per cent of GDP increase it posted in 2011, with the economy slowing to about 2.5 per cent in 2012 and perhaps as low as 1.5 per cent this year, those numbers still look better than most other EU countries.
Lukasz Lorencki of Cushman added that “Poland’s key assets include relatively high investment safety and high market liquidity compared with other countries of the region. With such healthy fundamentals the Polish investment market is likely to maintain its strong position in the forthcoming years.”
Rostowski: predicted return to growth gives Poland critics small window, beyondbrics
Poland cuts rates to boost growth, bb
Central bank hails end to Polish austerity, FT