Emerging Europe: Opportunity For Stock Market Investors

Emerging Europe: Opportunity For Stock Market Investors – seat11a Insights

Emerging Europe refers to countries in the eastern and southeastern parts of Europe that were once part of the communist Soviet bloc.

Adrian Kowolik

Adrian Kowollik has 16 years of professional experience gained at a leading German asset manager and a corporate finance boutique, among others. He has deep knowledge of the Eastern European and DACH-based equity and startup markets. He mainly provides advisory, corporate access and research services to Polish and DACH-based companies.

Introduction

Emerging Europe refers to countries in the eastern and southeastern parts of Europe that were once part of the communist Soviet bloc. The most significant countries in this region are Poland (with over 38 million inhabitants), Romania (over 19 million), the Czech Republic (over 10 million), and Hungary (approximately 10 million). These nations have experienced considerably more dynamic GDP growth than those of older EU countries like Germany and France.

Poland’s Economic Growth

For instance, Poland’s economy, barring the pandemic year of 2020, has grown at an annual rate of 3-6% for the past eight years. According to the World Bank, from 2015 to 2021, Poland achieved Europe’s 5th highest real GDP growth rate. Since 1990, the country’s nominal wage growth has averaged over 13%.

Capital Market in Poland

Poland also boasts the most developed capital market in the region, with 416 companies listed on the primary market and 359 on the alternative NewConnect segment of the Warsaw Stock Exchange. The country’s investment management industry manages around €60.4 billion in mutual funds and €37.5 billion in private pension funds, most of which are required to invest in equities. In the Czech Republic and Hungary, investment firms managed €36 billion and €31 billion in assets in 2021 (Source: efama.org).

Stock Exchanges in Emerging Europe

Stock exchanges in Emerging Europe are often regarded as a “haven” for value investors. Many companies trade at low single-digit multiples, with dividend yields ranging from 5-10%. In comparison, companies in the US and Western Europe, where capital markets are more liquid and efficient, seldom trade at multiples below 10x and typically offer 2-5% dividend yields.

Notable Investment Opportunities

Notable examples include pharma wholesalers Krka (Slovenia), Gedeon Richter (Hungary), and Polish IT company Asseco Poland. With these impressive statistics and promising opportunities, Emerging Europe presents a compelling investment landscape for stock market investors. For a comprehensive overview of the top dividend stocks from Central and Eastern Europe (CEE), visit eastvalueresearch.com.