Constructors lead the way

Last year was a very good one for the American stock exchanges. The S&P500 index showed that it was possible to earn more than 10 pct over the year – an excellent figure for a developed market. In January 2015 the time came to calculate the profits made over the period, and these had also been boosted by factors other than the rates of return over the last twelve months or a comparison share prices between US stock exchanges and those in the rest of the world. The gap between the economy of the United States and Euroland has started to narrow slightly, as could be seen in the euro zone economic data, while decreasing oil prices worsened the prospects of American energy companies and the strengthening dollar weakened the hand of American exporters. Meanwhile, in Europe the long-awaited quantitative easing programme, which had been applied across the ocean for the last few years and contributed to a large extent to the bull market stateside, is now being implemented. In Euroland the scale of the programme, which involves the European Central Bank buying up bonds (and supporting the economy with the resulting injections of cash), turned out to be twice as large as analysts’ had expected. On the one hand, the low oil prices (as well as other energy sources) are hurting the energy sector, as is clearly evident on the stock exchanges; but on the other they are dampening the inflationary pressure related to the economic revival, thus putting off increases in interest rates. The puzzling state of the global financial markets becomes even more complicated because when factoring in the impact of the political situation. The conflict in Ukraine and the Middle East as well as the uncertainty following the outcome of the Greek elections, the spectre of the Grexit (Greece exiting the eurozone) and the imminent elections in Spain, could all have been having a significant impact on the situation. Meanwhile, in Poland the beginning of the year could have whetted the appetite for slightly higher rates of return. The economy, which continues to grow at a rate of over 3 pct and the slightly weaker złoty have created favourable conditions for exporters, while the funds money earmarked for investing held by pension and investment funds could generate greater demand. This scenario looks even more likely considering the fact that interest rates could be lowered even further, reducing the profitability of bank deposits. The situation is also optimistic for the sectors covered by ‘Eurobuild CEE’. This year will see substantial investment in the energy sector (as much as PLN 20 bln) and the railway sector (PLN 9 mln) as well as the beginning of the return of even more money to the road sector (as much as PLN 90 bln by 2020). For developers the reviving economy and the increasing chance of interest rate reductions are having a positive influence on the prospects of residential developers. According to many analysts, profits in 2015 and 2016 could increase by as much as several dozen per cent. When it comes to commercial developers, the risk of their commercial portfolios diminishing in value will continue to be a worry, but this will not be enough to prompt their share prices to tumble.

In January the behaviour of the indexes we are most interested clearly benefited from the favourable conditions. WIG-Construction went up and pulled away from broad market indexes, while WIG-Developers also did better than the main indexes, but they were all down anyway. Budimex, which celebrated the beginning of 2015 by surpassing its annual high of April 2014, was the star performer among the construction firms. Unsurprisingly, representatives of the company are in a very upbeat mood. In its summary of last year (the company had already published its 2014 results) it was emphasised that this was the best year in the history of its operations (contracts signed worth PLN 6.3 bln and a 40 pct y-o-y growth in operating profit). With the future in mind, Budimex wants to employ as many as 800 people to prepare for a broad front of construction work in the road, railway, energy and residential sectors. Double-digit growth was also registered by the Mostostals: Warszawa and Płock. Elektrobudowa made up for its losses suffered a year ago, when the crisis in Ukraine broke out, as its share price returned to around PLN 100. Almost all the companies listed registered increases, reflecting investors’ faith in this sector.

In line with analysts’ predictions, the first few weeks of 2015 were not very good for commercial developers. GTC and Echo, both of which are important in the WIG-Developers index, lost value. Meanwhile, residential companies saw their prices go up, including Dom Development and Polnord. In addition, the news that the number of building permits had increased by almost 40 pct y-o-y confirmed that 2014 was a good year, while the growth was as much as 35 pct for construction work started. ν (Mir)

Hungarian star shines brightly

After a very weak December, the beginning of the year turned out to be an excellent period for the Hungarian BUX. The index increased by 8 pct in over the first weeks, while in Prague the PX 50 gained more than 7 pct. So it could be that the specificity of the Warsaw stock exchange is effectively immunising it from the trends on other markets. Both the other stock exchanges in the region managed to bounce back after a temporary correction in mid-January and moved clear of their levels at the end of 2014. The fact that the Warsaw stock exchange was the most resistant to the December declines could be some sort of consolation.