Polish stocks enjoy big rally as investors seek havens from trade war

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Poland’s stock market has emerged as one of the world’s top-performing bourses this year, helped by the country’s relatively insulated position from the global trade war and an expected boost from neighbouring Germany’s fiscal “bazooka”.

The benchmark WIG Poland index has climbed 28.6 per cent year to date — despite slipping on Monday after an unexpectedly close first-round presidential vote — placing it ahead of other strongly performing markets such as Chile and Greece. In contrast, the US’s benchmark S&P 500 is up about just 1 per cent.

The rally has been driven by a “significant inflow of foreign capital”, according to Tomasz Bardziłowski, chief executive of the Warsaw Stock Exchange, due to Poland’s healthy economy as well as the equity market’s rising dividend payouts and comparatively low valuations. Polish stocks trade at a 15 per cent price-to-earnings discount to the MSCI Emerging Markets index.

The market has also proved popular due to the fact that about three-quarters of Poland’s commerce is conducted within the EU. That has made it less vulnerable than others to the trade war launched by US President Donald Trump and a more attractive bet for some investors.

“The market is small enough for foreign capital movements to have a visible impact,” said Piotr Arak, chief economist at Poland’s VeloBank. “Trump’s trade war also diverted capital flows from the US to emerging markets like Poland and parts of Latin America less affected by tariffs.” 

The WIG index is about $135bn in size, compared with $2.9tn for the UK’s FTSE 100 and more than $50tn for the S&P.

Poland, which cut interest rates this month for the first time since Prime Minister Donald Tusk returned to power in 2023, is also benefiting from a huge increase in planned spending by neighbouring Germany, its biggest trading partner.

Germany’s struggling economy sparked jitters in Warsaw last year. But those concerns had given way to hopes for a positive knock-on effect for Poland from the “bazooka fiscal stimulus” package drafted by the new government in Berlin, said Kamil Stolarski, head of equity market research at Santander Poland.

The Polish economy grew 3.8 per cent year on year in the first quarter of 2025, the second-fastest rate in the EU after Ireland and well above the bloc’s average growth of 1.4 per cent, according to Eurostat data. 

Meanwhile, analysts forecast that earnings per share for Warsaw-listed companies will grow on average by about 10 per cent in 2025. Financial services companies, which account for two-fifths of the WIG, are raising dividends after posting bumper earnings. Polish banks had combined profits of 42bn zlotys ($11bn) in 2024, up from 27.6bn the previous year.

Poland should “remain resilient during these turbulent times, thanks to its diversified economy, a large domestic market and limited direct trade exposure to the US”, said Beata Javorcik, chief economist at the European Bank for Reconstruction and Development.

Poland will have the strongest economy this year among the EU’s formerly Communist countries, with annual growth of 3.3 per cent, according to the EBRD’s latest forecasts. 

Domestic politics have also been encouraging investors. The return of Tusk and his pro-EU coalition has unlocked billions of euros in previously frozen EU funds. The government has begun deploying this money — largely on infrastructure and energy transition projects — as it seeks to move away from the country’s reliance on coal.

Shares in state-controlled energy groups have surged, with oil company Orlen up 53 per cent and utility PGE rising 56 per cent since the start of the year.

The WIG lost 0.8 per cent on Monday, as attention now turns to the presidential run-off election on June 1. Rafał Trzaskowski, who is Tusk’s candidate, is facing an unexpectedly tight contest against Karol Nawrocki of the opposition Law and Justice (PiS) party, after Trzaskowski only narrowly won the first round on Sunday. A Trzaskowski victory in the run-off would enable Tusk’s government to proceed with long-delayed reforms previously blocked by outgoing president Andrzej Duda, a PiS appointee. But a Trzaskowski defeat is seen as likely to destabilise Tusk’s coalition and could even force early parliamentary elections.

“A victory of the candidate of Tusk’s party would be supportive for investors’ sentiment towards Polish assets, while a defeat could provoke new concerns about Poland remaining on the reform path,” said Piotr Bujak, chief economist at PKO BP, Poland’s largest bank.

Both presidential contenders have placed national security at the heart of their campaigns, echoing Tusk’s November warning about the “serious and real” risk of global war. Yet investors have recently focused instead on Trump’s diplomatic efforts to negotiate a truce between Russia and Ukraine. That could position Poland as a strategic hub for Ukraine’s eventual reconstruction.

“I think that one key reason for the market rise is that investors are really betting on peace in Ukraine,” said Andrzej Kubisiak, deputy director of the Polish Economic Institute, a think-tank.

“Poland’s strong economic showing in the EU is boosting investor confidence, though the outcome of peace talks still poses a risk to further gains on the Warsaw exchange.”