Builders buck the trend

The spectre of economic slowdown is stalking the global markets once again, and in the case of the eurozone, even a recession is feared. The recent forecasts of the International Monetary fund, which have been reviewed downwards, are pointing to the realistic possibility of such a scenario. The deteriorating forecasts for the German economy are particularly worrying for investors. Added to this, the stock exchanges have already absorbed the ending of quantitative easing in October by the American FED. This has been the driver of the economic situation on the global markets for the last few quarters, resulting in all-time highs, such as those registered on the US S&P500 index. A similar QE approach is now set to be implemented by the European Central Bank, but the clear resistance to this measure by some of the decision makers on the Old Continent is pushing the indexes down. The promising data for the US economy and the end of US “money printing” should bring forward the prospect of increased American interest rates, but this still remains some way off, since it would bring to an end the present ideal conditions for buying shares (low interest rates and economic growth). In Europe all eyes are turned to Germany, where the partial H2 data is raising concerns about the EU’s largest economy. Declining orders for German industry and the pessimistic forward indicators have not gone unnoticed by investors on the Warsaw Stock Exchange. Economists are now suggesting that Q3 might not have been the lowest point of the slowdown, as was earlier thought. Much points to the fact that the continuing tension between Russia and Ukraine, and its effect upon trade and business contracts, has also been a significant contributory factor to the general situation. Looking to the future, analysts are more hopeful about 2015 – some developed markets are forecast to grow faster than in 2014, including the Polish economy, partly thanks to the availability of EU funds.
The last few weeks on the WSE have not been as good as previous ones. The 10 pct growth in August and September has now been put into reverse with smaller (3–4 pct) declines. Of more concern were the decreases on individual days in mid-October, which were worrying due to their suddenness, reflecting the withdrawal of foreign capital for the ‘safe havens’ of more developed markets. The stock exchange was boosted by the clear reduction in interest rates in Poland by as much as 50 base points to shore up the domestic economy. However, share investor response to this was muted because it had been expected and – according to some analysts – much delayed. And this time the industry indexes were mixed in their reactions. WIG-Developers registered a 2.2 pct decrease but remained slightly stronger than the main indexes (the WIG fell by almost 3 pct, while WIG20 suffered a 4 pct slump), although WIG-Construction remained in the green, with growth of more than 2 pct.
Among the construction firms, Elektrobudowa made up for losses incurred in previous months, Budimex’s price also remained strong. Things look promising in particular for the latter company – if a recent recommendation is anything to go by from ING Securities, which recommends buying the firm’s securities at PLN 155 per share, compared to the previous target price of PLN 110. Budimex has indeed earned plaudits for the success of its operations on a tricky construction market, especially when it comes to securing new road contracts. Among the tenders won by the company in the last few weeks was one for a section of the S7 road worth PLN 280 mln, a PLN 424 mln contract for the Lublin ring road, and one for a section of the A1 for PLN 327 mln.
The situation of a former giant of the sector, Polimex, is now starting to look slightly less fraught. The company has completed another stage of its restructuring, in the form of the largest conversion of debt into securities in the history of the WSE – more than PLN 0.5 bln of debt was converted into newly-issued shares, a large portion of which were acquired by the state-owned Industrial Development Agency. Under the plan, Polimex will now switch its focus to power and petrochemical projects, but in order to streamline itself for this specialisation, Polimex is likely to sell another subsidiary – Mostostal Siedlce.
Meanwhile, the performance of residential developers continues to intrigue. The data reveals that they enjoyed apartment sales growth of as much as 20 pct in Q3. Robyg and Dom Development did particularly well in terms of apartment sales over the quarter. But these good results have yet to be accompanied by a surge in the buying of shares in residential developers. The WIG-Developers index remains in the red, both in monthly and annual reports. ν (Mir)

Investors take flight

Worsening moods on the global stock exchanges and the flight of capital back to developed markets usually spell problems for the stock markets of emerging countries, especially the less liquid ones. Foreign investors are fleeing from such markets at the moment. But as was the case last month, the region’s largest stock exchange, Warsaw, turned out to be the most resistant to declines. The Czech market, as measured by the PX50 index, lost almost 8 pct and the Budapest BUX just over 5 pct.