Stable bounce

The policies of the largest central banks combined with the expected economic revival, is driving the appetite for the risk connected with stock exchange investment. In the US and Germany the all-time highs of the indexes are not causing too much of a stir anymore, because there have already been a few since the beginning of 2013; however, the fact that the so-called emerging markets’ trading floors are now joining the group of growing indexes is something quite novel. Clearly investors have stopped paying attention to the threat of inflation, the appearance of which could spell the end of the era of expansiveness being practised by central banks. However, the choice of the Fed’s new head, Janel Yellen, who stated that the Fed was mostly there to serve the Americans, might yet mean that the era will continue for some time. This is being facilitated by much improved data from Europe and the lowering of tension over the situation in the Middle East. But the upward trend of the indexes in September was put on hold by the fiscal situation in, of all places, the USA. Over this period the spectre of the ‘fiscal cliff’ returned, which helped to raise the temperature on the capital markets. The fact that a crisis had been averted was received on the US stock exchanges by the S&P500 index setting another historical record, while the European stock exchanges, including those in Spain and Greece, veered up sharply. In addition, the financial results season has started in the USA – and the largest economy’s companies are showing better profitability.
In Poland the market has now digested the news on pension fund reform, an issue which should now cease to trouble the WSE for another couple of years. This issue did not prevent the WIG from reaching its long-awaited level of February 2008, before the start of the financial crisis. But so far only the WIG has achieved this milestone. The WIG20, which was at 3,000 points in February 2008, is still around 2,500 points. Over the last few weeks, the WIG increased by 6.6 pct, while the WIG20 moved up by over 4 pct. The WIG Construction skyrocketed by 16 pct, and the WIG-Developers grew by over 8 pct – both sub-indexes registering their highest levels since May 2012 and May 2013 respectively. Budimex looks to be the pick of the construction companies, as its shares reached their highest price since the beginning of 2007. The company has been able to turn its attention to 2014 (when the tenders funded by the EU’s new budget are due to be held), unlike those that are undergoing restructuring. Two other large companies also contributed to the growth of WIG-Construction: PBG gained over 5 pct, while Polimex’s share value grew by 12 pct. PBG decided to lower its share capital in order to boost the price of its shares and make it possible for the creditors of the company to acquire them. As a result, its creditors will acquire a 75 pct stake in the company. In the meantime Polimex is starting the second stage of its debt restructuring: following its arrangements with creditors the repayment of its debt will take place over 2016–2019, the period when the company is expected to turn itself around. An important step in this process involves a contract to construct two turbine units for the Elektrownia Opole plant in a consortium with Rafako and Mostostal Warszawa. The signing of the contract has also had a positive influence on the share prices of Mostostal Warszawa and Rafako. Polimex has scheduled an extraordinary shareholders’ meeting for November 12th to deal with the new share issue and the sale of the company’s assets, which both form part of the construction giant’s restructuring plan. As far as the developers are concerned, the issue of Wrocław-based Gant has come to the fore, bringing an end to the speculation that accompanied each debt service deadline related to the company bonds issued over the last few months. Creditors have filed for the company’s liquidation, while Gant itself is seeking bankruptcy open to arrangements. The first hearing is planned for the end of October. Interestingly, the issue of liquidity management, which is at the heart of Gant’s problems, does not apply to other developers, even though the concerns of several months ago regarding a few large companies have turned out to be justified.


Chasing behind Warsaw
The Budapest stock exchange index exhibited rather more modest growth compared to Warsaw’s WIG, growing only on the back of the increases that lasted until the last week or so of September.
The BUX index has been unmoved by macroeconomic data indicating a moderate improvement of the country’s economic situation, mostly due to the positive industrial production data. The BUX index is still fluctuating at around 18,000–18,500 points and has been unable to return to the level of almost 20,000 points registered in August this year. The PX index in Prague has been doing slightly better, moving up by 4.6 pct in the same period. An additional element influencing the
moods of Czech investors are the upcoming parliamentary elections; but due to the shallowness of the Prague market, this factor has had a limited impact so far.