Gloomy when it’s sunny

The revival on the emerging stock markets, which was announced last month and was supposed to take place at the end of April or early May, has still to make any kind of appearance. The poor data from the US, where the first GDP estimate for the January–March period showed only microscopic growth (0.1 pct), did nothing to improve the mood, while the low trading activity related to the May holidays wasn’t helping the WSE indexes either, and instead has made things easier for sellers. The situation was not even helped by the promising figures for Polish GDP growth in Q1. The economy grew by 3.3 pct, above earlier projections of 3 pct following the speeding up observed in Q4 2013 when GDP increased by 2.7 pct. With inflation remaining stubbornly low, such factors should combine to increase the attractiveness of shares. Low inflation keeps interest rates down, thus reducing the profitability of investment in deposits. The prospect of exceeding 3 pct GDP growth this year is now becoming an increasingly likely scenario – the National Bank of Poland is forecasting a figure of 3.6 pct, while the Ministry of Economy is projecting 3.3 pct. It should be noted that in the last budget it was assumed that this year’s growth would only be around 2.5 pct. In view of such good prospects for the Polish economy, only the news from across the Western border could be a cause for concern, as the German economy (our main business partner) seems to be stalling. In Poland the open pension fund issue is an important element that is impacting the WSE, turnovers and buyer activity. In July those who have so far been paying into open pension funds can decide whether they want to stay in the fund or move the entirety of their fees to the Social Insurance Institution (ZUS). Can the behaviour of the indexes in the last few weeks be explained entirely by anxiety over the changes to open pension funds? The inability of the WIG 20 to move above 2,450 points, despite the positive macro-economic situation, has extinguished the optimism of those who were hoping that the higher than expected GDP growth would provide them with higher rates of return on their stock exchange investments. The situation for the sector indexes – a decrease of 8 pct in the case of the construction sub-index and of over 3 pct for the developers’ index, when there has been an increase in construction output in the last few months and favourable conditions on the residential market over the six months (low interest rates and growing demand for properties) – must be worrying. Over the last six months, WIG Construction has lost more than 15 pct and WIG Developers 12 pct, while the broader market indexes have fallen by around 7–8 pct. April and May was a bad period for Elektrobudowa, when its price fell to just over PLN 70. The company is suffering due to the continuing tension in Ukraine and its exposure in that region. Its share price has now slipped by nearly 50 pct in the course of six months. Among other large companies with significant weight in the WIG Construction index, the prices of Trakcja and Budimex decreased slightly – by 12 pct. The latter company has a nearly 40 pct share in the weighting of the index. In Q1 the construction giant earned more than in the previous year (PLN 43 mln compared to PLN 35 mln at the group level), but with slightly lower revenue. Its order portfolio has also expanded compared to the end of 2013 – by PLN 200 mln to PLN 4.5 bln. Meanwhile, Polimex-Mostostal is looking to seal a new deal with its creditors, as it wants to change its debt into shares in a new issue. The company has now become one of the ‘grosz’ companies (with a share price of 10 groszy) – and is in the single-price system, which is characteristic for companies with a low share price. Polimex wants to sell its subsidiary Torpol via the stock exchange and improve the company’s balance as quickly as possible in order to return to the market and actively participate in tenders. As far as developers are concerned, the fluctuations were slightly less severe, and only in a few cases was the downward movement measured in double-digits. Following an arrangement with one of the banks financing the Złota project in Warsaw, Orco to a small extent made up for the huge loss it suffered in April, but it is the stabilisation of its share price at the moment that is crucial rather than any growth in profits. The share price of Gant was another that experienced shrinkage, after one of the company’s creditors opted not to accept arrangement proposals. An extraordinary meeting of shareholders has been convened for the end of July to decide upon changes to the supervisory and management boards of the company, among other matters. This has been brought about by Global Energy becoming one of the shareholders. Buwog, a spin-off from Austrian group Immofinanz, has just entered the WSE. The company is not planning to operate in Poland, however. Instead it just wants access to the capital available on the Warsaw exchange. (Mir)

Neighbours doing better

The stock exchanges in Budapest and Prague can consider the end of April and early May to have been a successful period. The BUX grew by as much as 5 pct and has moved up by 12 pct since the doldrums of mid-March. In Q1 the Hungarian economy was growing at a rate of 3.5 pct y-o-y, which is the best figure since 2006. Meanwhile, the Prague stock exchange, which lost almost 2 pct over the last month, achieved the same level as the Polish trading floor. Compared to the ides of March doldrums, the PX50 only gained 4 pct (still, the WIG remains the weakest of the three as it only gained 3 pct over this period).