Little Christmas cheer on the WSE

At the end of the year investors are usually filled with the spirit of Christmas. But even if the festive mood had no impact on the market, the health of the economy and the prospects for 2014 should have helped prices to soar. And even if it turned out that these factors were slightly worse than expected, the situation on the foreign markets should also have provided the Warsaw stock market with a fillip. However, neither the 2 pct GDP growth figures for Q3, nor the increasingly optimistic forecasts for 2014 (an expected growth rate approaching 3 pct), nor the boom on the main foreign markets, had any positive impact on the mood of traders. Even the news from abroad, such as the scaling back of the money being printed by the US (by USD 10 bln per month), did not result in any upward adjustment. In the world’s largest economy the combination of the stubbornly high unemployment rate, which is limiting wage increases and inflation, as well as cheap financing, is helping to push up both the profits of corporations and the stock exchange indexes. The economy in the eurozone is also improving, despite stark differences between individual countries (contrast the increasingly thriving Germany and crisis-battered France). In this context, the shrinkage of the main WIG index by over 5 pct and the WIG20 by over 6 pct in the last few weeks came as something of a painful shock. It would be difficult to blame the disappointing performance of the indexes on the final approval of reforms to the open pension funds law, because firstly the impact of this news had already been absorbed by the market, and secondly the reforms do not necessarily entail any short term weakening of the stock exchange. The industry indexes also fell back – both WIG-Construction and WIG-Developers declined, by 8 pct and 6 pct respectively. Bearing in mind the aforementioned positive macro-economic indicators, the decrease in the construction companies’ index is also surprising for another reason: the European Parliament has passed its 2014–2020 budget, in which Poland is to receive EUR 4.5 bln more than in 2007–2013 and the lion’s share is earmarked for the cohesion fund (which in practice means infrastructural investment). The General Directorate of National Roads and Motorways (GDDKiA) has already started increasing the number of its tender announcements, while the Polish State Railways (PKP) is now boasting of record investment levels for the next few years (PLN 9 bln this year). Road and railway construction companies could have better times ahead of them, as long as they maintain a good financial standing. However, the two largest companies – Polimex and PBG – are now negotiating with their creditors with the aim of turning their recent fortunes around. Neither firm will look back on 2013 as having been a good year – their share prices plummeted by 75 pct and 55 pct respectively last year. The very end of the year also proved to be a rough period for Polimex due to the termination of two contracts by ordering parties (the University of Gdańsk and the GDDKiA). The last few weeks of the year were also marked by a strong reduction in Elektrobudowa’s share price, which lost 40 pct of its value after the beginning of November. This did not go unnoticed by analysts, who by New Year’s Eve were already tipping the company as one worth taking note of – if only because of the sharp sell-off of its shares at the end of the year. Meanwhile, Mostostal Export opted for a change in its business profile – the construction firm intends to metamorphose into a mining company for copper, gold and coal. It is planning to change its name to MSX Resources by the end of February.
Despite their travails, companies from the construction and development segment have been queuing up to list on the Warsaw Stock Exchange. The end of the year saw the debut of Capital Park – the developer lost 2.3 pct on its flotation, ending its first day of trading down by around 10 pt. Other firms to take to the trading floor included MFO (the manufacturer of steel profiles raised PLN 15 mln) and steel structures manufacturer Vistal, which raised PLN 50.5 mln on January 8th. Companies that are already traded on the Warsaw Stock Exchange are also looking to raise funds. Thanks to the issue of series ‘R’ shares Polnord raised PLN 50 mln gross. The funds are to go towards helping the firm achieve its strategic goal – the sale of 1,500 apartments per year. GTC has also announced proposals to issue 32 mln shares.


South in the red
There were some slight falls on the Budapest stock exchange in the last few weeks of 2013. Even though, just like the WIG, the BUX has been included in the so-called Turkish basket (some emerging markets have been dragged downwards by the Turkish stock exchange, where the XU100 index was sharply down in the wake of a corruption scandal), it still lost less than the main WSE indexes. Meanwhile, the PX50 index in Prague was down by 1.5 pct. Over the whole of last year the PX50 lost 6.3 pct, while the BUX maintained its level and the WIG20 traded 7 pct lower (even thought the WIG broad market index saw growth of 7 pct).