Waiting for Santa

Since the dark days of 2009, the S&P500 (the most prominent and reliable stock index in the US) has risen by almost 500 pct. It has recently breached historic heights a number of times, having grown by almost 25 pct since the beginning of the year. In recent weeks, despite slightly weaker US GDP growth in Q3, it was given a further boost by the easing of US-China tensions and a mooted agreement to limit the scale of the ongoing trade war. At the same time, the continuing positive consumer sentiment has alleviated fears of a recession in the US. The buoyancy of the country’s economy and stock exchanges has been encouraging investors outside America to buy, which bodes well for the last few weeks of the year and the prospect of another so-called ‘Santa Claus rally’. Despite the weakening economic data, European indices such as the DAX have also been positive about the last few weeks, despite the stagnation in Germany, the largest economy in the EU and economists’ expectations of a ‘mild recession’ next year. The signs of a slowdown are more evident in Poland. GDP growth was 0.7 percentage points down on Q2 (3.9 pct against 4.6 pct the previous quarter) – the fifth quarterly fall in a row. And 2020 is likely to see a continuation of this trend as economists are currently forecasting app. 3.5 pct growth for next year, but this is still a decent rate. The Warsaw Stock Exchange indices have been in the black over the last period – the WIG and WIG20 have each risen by 3.5 pct, while the construction index has also strengthened, compensating slightly for losses in previous months, and has now broken even since the beginning of the year (an increase of more than 4 pct). However, this pales in comparison to the performance of WIG-Real Estate, which has gone up by 25 pct so far this year. GTC has been in good form, registering an 8 pct growth in revenues and operating profit as a result of the greater amount of office and commercial space it now has under management. The total value of this is now above EUR 2 bln (around 10 pct more than a year ago). Another commercial developer, Capital Park, saw its profits grow by more than 50 pct in Q3 up to PLN 90 mln. A revaluation of its real estate portfolio also resulted in an increase of as much as 101 pct to PLN 135 mln. In the light of these good results, its dominant shareholder, US fund Maddison, has announced a call for the company’s shares and – provided this is accomplished – will be delisting Capital Park. However, the price so far offered by Maddison is not very attractive (PLN 5.84 per share). The situation for residential developers is even better. Dom Development saw its earnings grow by 73 pct up to PLN 170 mln over the first three quarters, when it sold 2,500 apartments. The company does not believe that a slowdown is imminent, and so is planning to put another 1,000 apartments on the market in Q4. Home prices are still rising, although slightly slower than of late. Dom Development, prompted by the high cost of labour and materials, is now carrying out 70 pct of its projects through its own general contractor. One of the companies publishing its Q3 results early was, as usual, Budimex. Its profit turned out to be significantly lower (PLN 65 mln compared to PLN 120 mln a year earlier), but the firm has repeatedly bemoaned the impact of the labour and material cost inflation. In the first nine months of the year its revenue remained relatively constant (PLN 5.3 bln), while its order portfolio reached almost PLN 11 bln. Erbud is now out of the woods, as can be seen in the increase in the profitability of the construction group, which in 2018 made significant write-offs for some of its contracts. The group made almost PLN 30 mln in net profit compared to a loss of PLN 25 mln in Q3 2018. Polimex Mostostal also saw improved results in Q3, when as a group it earned PLN 12.7 mln compared to PLN 11 mln a year ago, but more importantly it generated a cumulative profit for the first three quarters (compared to a loss a year earlier). The number of large construction projects is still high – one is being carried out by Prochem, which is to build a plant for Korean car battery manufacturer Foosung. (Mir)

The sun shines on the region

The CEE Plus index, which is now published by the WSE to gauge the sentiment on the across the Polish, Czech, Slovakian, Hungarian, Croatian, Romanian and Slovenian markets, was up by 4.8 pct over the month. The stock exchanges in Budapest and Prague have also been doing well – each gaining 6 pct.