Bouncing back from the brink

Incredible as it may seem, there have even been signs of a slight overheating of the economy – as evidenced by Twitter’s debut on the New York Stock Exchange. The company, which had not revealed its profits to investors – and it is not actually clear how it makes money – was worth USD 30 bln at the end of the first day of trading. So it came as no surprise when the new head of the Fed, Janet Yellen, at more or less the same time had to assure American senators that the situation on Wall Street did not herald an imminent speculative bubble. At the same time, the Fed has been indicating that there are no plans at the moment to turn off the influx of money into the market. It is hoped that this continuing liquidity will keep the bourses buoyant – a scenario made more credible by the current macroeconomic data: US GDP growth exceeded 2 pct in Q3, while in Japan the rate of growth was also around 2 pct. Some signs of a revival are also evident in Europe. The situation in Poland has been improving too. In Q3 GDP growth stood at 1.9 pct, turning the expected bounce into reality. There have also been some promising developments on the capital markets: investment funds have been receiving more money than they have been losing for over a year now, with the incoming finances going to equity funds; in addition, the proposed changes to open pension fund legislation in Poland (the obligatory limit on investment in open pension funds) has ensured a constant stream of funds to the WSE. In this context the growth of the main indexes of not more than 3 pct does not look very impressive, but the situation on the WSE is favourable, as can be seen from recent successful public offers, such as that of warehouse developer MLP Group. The company raised PLN 90 mln from the market and its share price increased by more than 9 pct on the day of its listing, thus contributing to the gains on the main indexes and the construction and developer sub-indexes. For constructors the period turned out to be exceptionally strong as the index grew by over 6 pct in four weeks. Clear increases could be seen in the performance of individual companies: Budimex is enjoying its highest price for over five years. The company has registered good results (despite a fall in its revenue by a fifth, Budimex improved its operating profit in Q3) and has announced that dividends are to be paid from its profit for 2013 (the company paid PLN 112 mln to investors for 2012). As far as the other two giants are concerned, PBG’s and Polimex’s revenues were half those of last year. However, they did manage to improve their financial results by maintaining large order portfolios, of PLN 5.6 bln and PLN 10 bln respectively. Mostostal Export suffered a loss three times higher than last year, prompting its share price to slump by nearly 60 pct; whereas the other Mostostal, of Zabrze, generated similar results to last year, while at the same time continuing with its restructuring, which began at the beginning of the year. In the last three months the company’s share price increased by over 50 pct. Meanwhile, after the troubles of Gant another developer is struggling to pay its liabilities. Plaza Centers saw its share price halved after it was revealed that it would fail to redeem its bonds in due time. The company has successfully applied for a debt moratorium and presented a restructuring plan involving a prolongation of the repayment period; however, its share price has now plummeted by over 80 pct from its level of a year ago. Nevertheless, other developers, particularly in the residential sector, are now basking in the improving economic climate. This can be seen from their sales figures. According to a survey by the Polish Press Agency (PAP) of the eight largest developers listed on the WSE, in Q3 apartment sales rose by as much as 43 pct over twelve months. Interest rate cuts have offset mortgage costs and made properties more attractive as investment products, thus inducing an improvement on the primary market. Dom Development boasted its highest apartment sales for the last seven quarters. Even though its results were clearly weaker than a year ago, this came as no surprise as the company had warned us that Q2 and Q3 would be weaker while stressing that its financial situation remains healthy.


Vltava and Danube data flowing in different directions
Despite the buoyancy of other stock exchanges, the BUX index in Budapest was no better than stable. Over the last month it grew by just 1.3 pct. The healthier macroeconomic situation does seem to be improving the fortunes of the BUX – Q3 gains amounted to 1.6 pct, compared to the 0.9 pct expected by economists. The data for the country is much better than in the neighbouring Czech Republic, where the economy is still struggling to extricate itself from the crisis. In Q3 GDP shrank by 1.6 pct, even though analysts had been expecting a much more palatable 0.5 pct fall. But this news has not held the Prague trading floor back from taking advantage of the optimism on the global stock exchanges – the index increased by over than 3 pct over the last month.