The spectre of bankruptcy that stalks construction

Despite the relatively healthy situation in the two most powerful economies in the world, China and the US, Europe is still the focus of investors' attention and is deterring them from buying shares. In the US the results season has been more about more surprises than disappointments. China is still growing, although considerably slower, but still at a pace that is unattainable for the economies in Europe (GDP growth of 7.6 pct in Q2), and so it is a much better place to invest in shares than in European markets. Here the situation was quite nervous despite the holiday season - on the one hand the report of the so-called Troika (the European Commission, European Central Bank and International Monetary Fund) on the dire fiscal status of Greece caused panic on stock-exchanges, while the yields on Spanish and Italian bonds skyrocketed, which made the possibility of the insolvency of the two countries more likely. In this situation the last weapon in the fight against the unstable markets turned out to be the never-surrender attitude of the head of the European Central Bank, who said that the ECB would do everything to keep the common currency alive. Therefore what seemed to be a science fiction scenario only 3-4 years ago is now the subject of realistic projections over the next few years. The macroeconomic data is also doing nothing to improve the situation in the eurozone - even Germany, which has been strong until now, could fall into recession as soon as in 2 or 3 quarters. The economic slowdown of our neighbours is already perceptible in Poland. The economy is decelerating - the best proof of which was the June imports data, which dropped by nearly 6 pct y-o-y. This clearly signifies that the internal demand that allowed the Polish economy to acquire its ?green island' status over the last few years is weakening. It can also be clearly seen in June's retail sales (the Euro 2012 month), which grew by only 2.6 pct. More and more companies are experiencing problems - and not only in the construction industry. Upmarket supermarket operator Bomi has also filed for bankruptcy.

Despite all the relatively serious instability, the indexes of the main market did pick up - WIG gained 3.9 pct and WIG20 as much as 5.3 pct over the period. This was partly due to the Q2 results of large companies with good liquidity, which in the case of certain sectors (e.g. banking) testified to the very strong condition of such entities. KGHM earned PLN 1.5 bln in two quarters by implementing 70 pct of its plans for the whole 2012. The two sector indexes clearly differ from the main ones, even though the developers' sub-index registered starker decreases by losing over 6 pct, while WIG-Construction lost 5.2 pct. In the latter case the improved performance of the biggest companies was keeping the index from falling further. Admittedly PBG's price plunged by 21 pct, but Polimex and Mostostal Warszawa went down only slightly, app. 5 pct each. A change in the president of Polimex has taken place - Konrad Jaskóła, who remains with the company in a consulting capacity, has been replaced by Robert Oppenheim, who had been the vice-president. Polimex reached an agreement with its creditors at the end of July (the company requested a four-month grace period from its creditors). However, it will have to address the company's gigantic debt as well as the implementation of restructuring, which will involve selling some of its subsidiaries, such as Sefako and Energomontaż Północ. The Industrial Development Agency is interested in buying into both of these companies. Also, 49 pct of the shares in Torpol, which specialises in railway construction, could be put up for sale. However, one deterrent to a potential sale might come in the form of PNI, which was bought by Budimex but turned out to be a source of unplanned write-offs that dragged down Budimex's Q2 results. Its operating profit for H1 was more than 30 pct down on the same period in 2011. Its debts amount of app. PLN 30 mln resulting from PNI's restructuring as well as lower profit from development operations (revenue from this segment plunged by over 50 pct). And a number of bankruptcy filings have been made with regard to Alterco, which suggests that the next few months might still be difficult for companies in the construction and development sectors. ? (Mir)

Budapest and Prague in the green
The Hungarian BUX stock exchange gained 4.5 pct within a month, breaking its June record and reaching the level of 17,790 points. The Prague index also went up, by 2.9 pct. In achieving such results both bourses seem not to have been adversely affected by the data revealing that both countries were in recession - the GDP of both decreased by 1.2 pct y-o-y in Q2. Apart from lower external demand, both economies are being hampered by fiscal cuts and tax increases implemented by their governments. The stock of real estate company ECM on the Czech stock exchange remained stable at CZK 25, whereas the shares of Orco, which is also listed in Warsaw, fell by 6 pct.