Back to reality?

May was far from boring – that’s for sure. In the first ten days, indexes hit record highs almost every day

 After a nearly nine-week long rally, one might have thought that investors had lost contact with reality by buying so much, even taking into account the fact that the economic fundamentals in Poland are still very strong (in the first quarter, GDP will probably reach 5 pct). According to analysts, one of the reasons behind this amazing rally was the steady inflow of capital to investment fund companies, which forced managers to purchase more, resulting in a constant growth in prices. But at the beginning of May, the first signals were given from foreign bourses, and after a slump in world prices of raw materials, the situation also affected the WSE. Moreover, emerging markets investors were not willing to take any risks, as interest rates went up in the USA. All of this shows that the WSE is very much a part of the global market and is strongly influenced by global capital flows. Consequently, the second half of May saw rapid declines in the WSE’s indexes: on May 22nd, the WIG index dropped over 5 pct and according to analysts, a similar situation hasn’t occurred since the collapse of the Internet bubble in 2000. Now the main question is whether the Polish pension and investment funds will start to sell their shares – some specialists say that the WSE is just about to experience a correction, and others are predicting the end of the three--year bull-market.

But these aren’t the only events influencing the WSE in May. Companies published their first quarter results revealing a moderate improvement in the construction sector in spite of a harsh winter. Analysts were able to praise some companies – for example, Elektrobudowa, PBG, PMS and Polnord. But others are still suffering from very low profitability e.g. Budimex, despite winning many new contracts (among others Budimex Dromex won the contract for the rebuilding of Saski Palace in Warsaw worth over PLN 200 mln gross).       z (mir)