Indexical bipolarity

In global terms shares are now providing investors with the best opportunity to make money, as the US indexes have hit highs not seen for many years. In Japan you could even say, while maintaining a suitable sense of proportion, that the mood is euphoric. The Nikkei has improved by several dozen per cent since the beginning of the year. The economy, and first of all the stock exchange in Tokyo, are being boosted by fiscal stimulus from the Japanese central bank. Analysts are stressing that the policies of the largest central banks have led to a growth in the money supply, while the market for raw materials is shaky, which has turned shares into the best investment. In May, the Nikkei exceeded its level of December 2007 at the beginning of the crisis. By comparison, the WIG20 has more or less climbed halfway back to the level of that period. The weakness of emerging markets in comparison to developed ones is very much still the rule. However, according to analysts the stream of money will eventually feed through to the stock exchanges in our region. Still, you have to admit that as well as the financial engineering of central banks, the data for the American economy is also adding fuel to the highs in New York (the falling unemployment rate and improved consumer mood) - something that cannot be said about the Polish economy. In Q1 its GDP increased by only 0.4 pct. The question is whether the weak macroeconomic data will not discourage investors. So far, faced with very low inflation (less than 1 pct), the National Bank of Poland has cut interest rates yet again and consequently lowered credit costs to a record level of 3 pct. This is the economic environment the Polish stock exchange is currently functioning in, and with May likely to be the first month of growth for the WSE this year, it could be a signal that better times are just around the corner. Between mid-April and mid-May the WSE registered a slight increase (1.2 pct), while the WIG20 suffered a slight loss. The sector indexes behaved totally differently - the developers' index decreased by 1.5 pct, but construction was up by 6 pct. In the case of development companies this was the result of slight falls for some of the more heavily weighted companies in the index, including GTC and BBI, as well as some large reductions (e.g. Rank Progress). Shares in Dom Development performed very well, reaching their highest levels for more than a year, The share price of the company was boosted by the announcement detailing generous dividends of as much as 100 pct of the profit. The firm wants to pay out over PLN 90 mln - nearly PLN 3.7 per share from the profit generated in 2012. The developer is in rude health, which is reflected in its good results (a profit of PLN 26 mln in Q1, 80 pct more y-o-y), its margin (over 25 pct), and its comfortable liquidity (at the end of the quarter the company had over PLN 440 mln in cash). Meanwhile Gant, which is currently being restructured, languishes at the other extreme. The company suffered a loss of PLN 18 mln in Q1 compared to a profit of PLN 11 mln a year earlier. The second quarter should see a return to profit - says the company, mainly citing the completion of the Odra Tower building in Wrocław. The company also claims that it will pay off its May bonds within 2-3 weeks, as well as carry out a consolidated issue addressed to financial investors in the near future, enabling it to raise funds for new investment projects. As for construction companies, the share price of Budimex rose considerably - reflecting its Q1 net profit of nearly PLN 35 mln. The portfolio of orders that it accumulated over the period is worth PLN 480 mln, compared to nearly PLN 500 mln in Q1 2012. Citigroup values the shares of the construction giant at PLN 103.6, pointing out that the company, which is managed by Dariusz Blocher, could be the beneficiary of EU funds. Added to this is the fact that other giants listed on the stock exchange are in the process of restructuring - Polimex is winding up its operations in Romania, selling off its subsidiaries, and has also announced that it is making over 1,000 people redundant. Meanwhile, a new company from the sector debuted on the WSE at the beginning of May. This was Immofinanz, a developer listed on the Vienna stock exchange. But the company has not issued any new stock. One of the goals of the Warsaw listing was to increase the liquidity of its shares.

Neighbours doing better than Warsaw
The stock exchanges in Prague and Budapest over the period took the opportunity to steal a march on the WIG. The PX increased by over 3.4 pct while the BUX grew by 3 pct. Hungary seems to have put the worst of the downturn behind it. Admittedly, in Q1 its GDP fell by 0.9 pct y-o-y, but a decrease of 1.4 pct was expected, and the figure followed from Q4, when its GDP contracted by 2.7 pct. The Czech economy shrank in this period by nearly 2 pct y-o-y and some analysts have suggested that this year, as was the case in 2012, could be charecterised by negative GDP growth.