Spring thaw

In January indexes across the world dived, with the deepest, double-digit decreases occurring on the stock exchanges in Turkey and Russia. In spite of this the prospects for the global economy have been improving: 2013 was not a bad year for the eurozone (with average GDP at the same level as in 2012), as well as for the US and China. At the same time, low inflation has made it possible for central banks to keep the cost of money down, thus feeding the bull markets in New York, Frankfurt and Tokyo. This, when combined with the longing for an end to the six-year-old crisis, has also encouraged more optimistic forecasts for 2014. The US economy is expected to expand at a rate of nearly 3 pct, Germany at 1.6 pct (compared to 0.4 pct in 2013) and Japan at almost 2 pct. The health of the Chinese economy is not raising the same concerns as it was only a few months ago. In 2013 its growth amounted to 7.6 pct and is now expected to stay at a level of 7 to 8 pct over the next few years. In the case of Poland, growth has a chance of reaching as much as 3 pct, which could mean increased investment (including in the construction industry) and an improvement in the job market (as well as a possible improvement in the residential market). These optimistic forecasts have yet to be translated into upward movement on the stock exchanges – in January, decreases on developed markets amounted to 3 to 5 pct and in Central Europe of around 1 or 2 pct. By February 10th the WIG30 had made up for some of its losses, gaining 0.5 pct, while the WIG moved up 1.4 pct. WIG-Construction was the stand-out index, improving by 4.5 pct, whereas the developers’ sub-index slipped back by 2.2 pct. The Warsaw Stock Exchange has now digested the open pension fund reforms – at the beginning of February open pension funds transferred treasury bonds to ZUS, the state Social Insurance Institution, and thus became aggressive funds investing mostly in stocks. It is precisely this combination of good macroeconomic forecasts and the probable scenario of open pension funds generating the highest rates of return – just when millions of Poles will be deciding whether to stay in them or move to ZUS – that might inject more growth into the WSE. All this is being helped along by low inflation allowing interest rates to be held down, which in turn benefits the stock exchange as it becomes a more attractive investment option.
As far as construction companies are concerned, most of the attention is being drawn to Mostostal Warszawa’s successful start to the year, since when its share price has increased by over 40 pct. Half of the growth took place during one of the January sessions, when its stock rose by 18 pct following the news about how the work is to be divided on the contract won by the Warsaw-based company and Rafako for the construction of a turbine building in Jaworzno. As a result of this announcement, Mostostal Warszawa’s share in the consortium has returned to its original 40 pct. By the end of February it will be clear whether the contract for Tauron will be successfully completed. Work has definitely started on one of the largest investment contracts in the post-war history of Poland – the construction of two turbine buildings for the Elektrownia Opole power plant, which is owned by PGE. Mostostal Warszawa is also involved in this and its Spanish owner is confident that the contract will also be carried out successfully (the company’s share in the consortium comes to 24 pct). The significance of this project is even greater for Polimex Mostostal, as it is one of its key projects after emerging from an almost two-year battle over the company’s future. In the last few weeks the firm has received a fillip in the form of a new vice-president – Maciej Stańczuk, a well-known manager who has worked for the banks that the companies deal with and is also a former member of Budimex’s supervisory board. However, both the stock price of Polimex Mostostal and PBG (the owner of Rafako, which is in the consortium building the project in Opole) did not rise as much as the price of Mostostal Warszawa. As far as developers are concerned, the bounce in Gant’s stock price was very positive; however, it needs to be borne in mind that last year the share price of the Lower Silesian developer slumped by over 80 pct. The share price of Dom Development has been continuing to grow for a longer period of time – the company has reported improved apartments sales in 2013 on the previous year, particularly in Q4 (up by almost 40 pct) and its prospects for 2014 look very promising too. J.W. Construction is another that saw better sales last year; but any reflection of this has yet to become evident in its share price – the developer lost nearly 25 pct of its value over the last half-year.

Turkish influence
Compared to the stock exchange in Warsaw, the BUX index was weaker and lost over 2 pct in the first six weeks of the year. The Budapest bourse was impacted by factors such as the continuing tense situation in Turkey, despite the Hungarian economy showing some signs of recovery (GDP growth of as much as 2.5 pct y-o-y in Q4). Of the three stock exchanges, Prague is showing the best form – its PX 50 index has increased by over 2 pct since the beginning of the year. At the end of January/early February a new government was finally formed after the Czech parliamentary elections of last autumn.