Return of the downtrend

As the result of the presidential election across the ocean became known, investors turned their thoughts to the fiscal difficulties of the largest economy in the world. Anxiety over the ?fiscal cliff' pushed the New York indexes down. Company results in Q3, showing losses for the first time in eleven quarters, did not provide any fuel for growth. At the same time revenue levels were lower than analysts' expectations. All this was exacerbated by the effects of Hurricane Sandy, which quite quickly translated into macro economic data (including figures for the number of new jobs). Barak Obama's victory also received a chilly reception from the markets, despite the general expectation that his re-election would boost the stock markets. The situation was a little calmer in Europe. The Greek parliament accepted a package of cuts, and the country (where the economy has been shrinking for five years and where the unemployment rate has reached 25 pct) will probably be given two additional years to implement its austerity plan. The eurozone found itself in recession in Q3, being pulled down by its peripheral economies, i.e. Portugal and Greece. In spite of the fact that the macroeconomic news does not instil any optimism, analysts point out that many of the index decreases in November (2-3 pct every week on the main European indexes) is not in keeping with the information being communicated to the market. The Polish economy has also been affected by the second wave of the crisis - the forecasts for economic growth have recently been lowered by the European Bank for Reconstruction and Development and the IMF (to 2.2 pct and 1.75 pct respectively for 2013). No wonder that the central bank has lowered its interest rate and announced that this was the start of a loosening of its monetary policy. Paradoxically, the first half of November showed the strength of the WSE (as measured by the performance of the WIG20) against European indexes. A small increase could have been an effect of the improved Q3 results registered by the largest companies, but these were helped by the excellent results in the fuel sector. The construction and development sectors saw a return of declines. In the construction industry the losses affected some of the biggest players, which are entangled in financial problems, e.g. PBG and Polimex; in the case of developers, the companies suffering losses were Polnord, Plaza Centers and GTC. One construction company that actually enjoyed good results was Budimex, with a profit that exceeded analysts' expectations by nearly a third (PLN 55 mln in Q3). At the end of September Budimex's order portfolio looked less impressive than a year ago (PLN 6.4 bln vs. PLN 7.7 bln). The company is considering entering the energy sector, which is soon to be invigorated by the construction of an atomic power station in an investment of app. PLN 50 bln as well as many other projects that have been announced by the government. Polimex is also planning to enter this sector. The company registered a loss of PLN 258 mln in Q3 (its cumulative loss in 2012 amounts to more than a billion złoty), but insisted that its contracts for the construction of units for power stations in Opole and Kozienice should boost its results in subsequent quarters. The group is also disposing of a number of its subsidiaries: ZREW Łódź as well as Energomontaż Północ and Sefako. One developer that surprised analysts was J.W. Construction, by announcing a loss of PLN 6.1 mln in Q3 (compared to a profit of nearly PLN 6 mln a year earlier). In the first three quarters of the year the developer only made a profit of PLN 2.5 mln compared to PLN 30 mln a year earlier. Gant also looked to be in poor shape, with Q3 losses amounting to PLN 13 mln and more than PLN 20 mln after the first nine months of the year. The company is considering a share flotation addressed to a group of investors with no right of pre-emption, and is analysing a potential merger with Geo, Mieszkanie i Dom. Meanwhile, Dom Development gave analysts a nice surprise by making a PLN 35.5 mln profit, slightly less than in 2011 (over PLN 36 mln) but beating analysts expectations. (Mir)

Weaker than in Warsaw

The Prague and Budapest stock exchanges were weaker than the WIG20. The Prague PX lost 1.4 pct within the month while the BUX lost as much as 3.5 pct. The situation in Hungary is difficult - the country's economy has shrunk for three consecutive quarters. Economists expect that aid from the IMF might not arrive before the elections and a possible change of government in 2014. On the other hand, the first two weeks of November were the weakest period since July for the emerging markets, which is why the charts of the Warsaw and Budapest indexes reveal the strength of the former rather than the weakness of the latter.