PL

Working out the way ahead

Stock market report
The indices for the main trading floors of the Warsaw Stock Exchange have remained basically unaltered over the last few weeks, but the construction sector index performed worse than the broader market. WIG Real Estate, meanwhile, is back at its level from the beginning of the year

Autumn started with a flurry of events that conspired to sour the moods of investors, effectively putting a brake on the buying of shares. The first unwelcome news to spook stock holders was the sharp rise in oil prices as a result of the attack on Saudi Arabian oil refineries. The impact of this, however, turned out to be short-lived, unlike the gloom induced by the prolonged US-China trade spat. This issue has been effectively blocking any rises on the US and Asian stock exchanges (where the indexes have not shifted by more than 2 pct since mid-September), despite the continuing rude health of the world’s largest economy. The noises coming out of Washington in recent weeks have gone beyond simply plans to impose further tariffs on goods, and now extend to barring American funds from investing in Chinese companies, which has left its imprint on the prices of such stock exchange giants as Alibaba. In mid-October the tension eased slightly after another round of talks, which ended with the optimistic announcement of a potential agreement this year. In Europe it has been the looming spectre of Brexit that has been alarming investors. The deadlock in the UK parliament and the unpredictable consequences of Britain’s possible exit from the EU without a deal have paralysed the stock exchanges. The collapse of Britain’s oldest travel agency, Thomas Cook, which despite apparently being a small-scale event in the tourist segment, only added to the picture of impending crisis or, at the very best, a slowdown in the country’s economy. Europe itself is set for a downturn, with a recession expected in Germany (negative GDP growth over the next two quarters) due to its weakening industrial sector. The German situation generally tends to determine the economic mood throughout the EU, including of course, in Poland. The slowdown here has been noticeable, but has been extremely mild so far – and furthermore, while lowering its forecasts for global economic growth in 2020, the International Monetary Fund has at the same time revised its forecast for Poland upwards by 0.2 pp (projected growth of 3.1 pct in 2020 and 4 pct for 2019). Meanwhile, the beginning of autumn has been a calmer time on the Warsaw Stock Exchange – meaning that turnover has been reduced and the indices have moved only minimally. The government’s strategy for developing the capital market and the launch of employee capital plans have done little so far to stimulate investors’ imaginations. The lurches in the main indexes in recent weeks have been triggered by concerns about the future of the banking sector in the wake of an EU court ruling on Swiss franc loans. The general election has passed without much of an impact since the victory of the ruling party was fully expected – but the question remains of how many of the promises made during the campaign will be kept and what this will mean for the budget. Since the beginning of the year, both main indexes have recorded declines of 2 pct and 5 pct respectively. Only WIG-Real Estate has seen any significant growth, of 20 pct.

In the construction sector, the rail segment has ssen declines – such as those registered by ZUE and Torpol, which is surprising given the healthy state of the latter company. Trakcja, another firm involved in modernising railway lines, has raised capital from a new share issue forced by its weak results for H1 and a failure to honour loan agreements. The State Agency for Industrial Development was among those that offered it a helping hand. Another company seeking capital and an investor, Elektrobudowa, is to issue new shares and talk to financial institutions about debt restructuring. The plan to secure OTC Zarmen as an investor has, however, come to nothing, bringing its share price down in recent weeks. The largest increase and at the same time one of the few by construction companies was recorded by Mostostal Zabrze. This, however, was the result of a 2:1 share consolidation (an actual reduction in the number of shares) carried out at the end of September. Another Mostostal – Warszawa – which is controlled by the Spanish group Acciona, was able to publish improved H1 results, but in this case that only meant a reduction of its losses from PLN 16 mln in H1 2018 to slightly more than PLN 2 mln this time round. The mood among developers has been much better – the emerging preliminary Q3 sales results suggest that they are still in a happy place. Those that published their full H1 results in September included Echo Investment, which earned profits of PLN 68 mln over the six months, but this was a decrease of 46 pct compared to 2018. The greatest contribution to the group’s gross profit was generated by its retail assets, followed by its office buildings and apartments. The company has also announced a number of ambitious residential and office projects for its large land bank as well as private rental sector development. The developer is now poised to be taken over by Budapest Stock Exchange listed Wing IHC owner, having signed a preliminary agreement to hand over a 55 pct stake. If the Polish antitrust authorities agree to the deal, Wing will be obligated to announce a share call for the developer valued at around PLN 2 bln. (Mir)

Sluggish start for new index

The CEE Plus index, which has been recently launched by the WSE to gauge the sentiment in the Polish, Czech, Slovakian, Hungarian, Croatian, Romanian and Slovenian markets, slipped back by 0.6 pct over the period. Hungarian index BUX, however, showed a slight increase, but investor activity has not been significant – as has been the case on the Polish stock exchange. Meanwhile, the PX50 in Prague lost ground slightly, by more than 1 pct over the last month.

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