The bounce is back but problems remain

Overall the indices in Poland broke even during this period, while the sector indexes behaved better than those reflecting the broader market for the second time in the last few months. On the one hand there is Germany and the US, and on the other Italy, which has already become notorious for its financial and economic problems, Greece, Spain (with an unemployment rate approaching 30 pct) and France, the economic health of which is also failing. Wherever the macro-economic data is optimistic, this is also reflected on the stock exchanges. The S&P 500 index, which outlines the general prospects of the US economy, is approaching its 2007 peak (the WIG20 needs to add 60 pct to its value to match this level), the DAX index in Frankfurt is getting along fine, and the Nikkei index in Tokyo grew by over a third in one quarter. But the situation in Poland does not look rosy. Admittedly the y-o-y GDP increase in Q4 2012 amounted to 1.1 pct, which was more than expected, but upon closer economic analysis there are more question marks than reasons for optimism. Furthermore, the fiscal situation is also a source of worry for the government - at the end of February the budget deficit amounted to 60 pct of the full-year plan. A shrinkage in the economy in Q1 has now become a possible scenario. Thus the Monetary Policy Council is maintaining a policy of cutting interest rates, but whether this helps will only become clear after a few months. The main WIG indexes finished the mid-February to mid-March period with a symbolic loss in the case of the WIG (0.8 pct) and a slightly bigger one for the WIG20 (nearly 2 pct). The WIG-Budownictwo (construction) and WIG-Deweloperzy (developers) sector indexes registered small increases (0.5 and 1 pct respectively), but at the end of February and March. February and March is the traditional period for publishing the annual results of stock exchange listed companies. After a difficult year this is not the sort of information that is easy to publish. In the case of Polimex, its 2012 loss amounted to PLN 1.1 bln. Even though the company is now almost out of the woods thanks to receiving some help (from the Industrial Development Agency, among others), restructuring and securing a number of contracts from the power industry (its entire order portfolio now exceeds PLN 11 bln), its share price plummeted to the levels of August. Representatives of the firm claim that it could become profitable again next year. Investors with shares in the second giant listed on the WSE are in a completely different mood - Budimex closed last year with a profit of PLN 112 mln (compared to over PLN 130 mln in 2011) and, equally importantly, with over PLN 1 bln in cash on its account. The company estimates that the next two years will be characterised by market shrinkage (even in 2012 the value of the contracts signed by the Budimex group decreased to PLN 2.8 bln, compared to PLN 5.3 bln in 2011), while its faster development is related to the inflow of EU funds in 2015. From the investors' point of view an important factor is that Budimex will most likely want to share its profits with its shareholders. Dividends could also be paid out by Dom Development, which generated PLN 91.2 mln in 2012 - 11 pct more than in 2011. However, according to Jarosław Sznajca, the company's president, 2013 will be a weaker year. The number of apartments sold will decrease, and margins will fall even further (in 2012 they were down to 24 pct compared to 33 pct in 2011). Compounding this, there is a high supply on the residential market, while programmes designed to support purchases of apartments will only be launched next year. Meanwhile, the PPG group, which is involved in investment, facility management and trading on the property market, is nearing its flotation on the WSE. PPG is already listed on the alternative New Connect market, where it carried out the largest public offering in the exchange's history with a value of PLN 250 mln. The company has raised PLN 7.5 mln from investors prior to its debut on the WSE, but its original plans, however, aimed at an amount six times greater.

(Mir)

Slightly down in Prague and Budapest
A small decrease in the Prague index (by 1 pct), together with the BUX's almost identical slip to that of the WIG20 (down by 1.9 pct), show that the region's stock exchanges are now converging. In early March, however, they had to react to the situation in Cyprus, which has reminded investors about the risks ahead for the Europe and discouraged them from investing in shares. In addition, the government in Hungary has introduced regulations to limit the power of the judiciary, which in turn could result in the blocking of the EU funds necessary for restarting the country's economic growth.