Constructors take the lead

Stock market report
Investors can be satisfied with the spring increases on the WSE. In April the WIG20 index was one of the strongest in the world, even despite the corrections across European markets. The construction companies’ sub-index was also stronger than the broader market once again

The promising signals from the economies of developed countries and the ‘cheap money’ made available by the largest central banks have laid good foundations for boosting the global stock exchanges. The prospects remain optimistic despite the corrections on the largest European trading floors in April. The potential for an escalation of the conflict in Ukraine has become more distant, oil prices are up and companies’ Q1 results have confirmed what the macro-economic data has been saying. In this situation the issue of Greece or rather the Grexit – Greece’s potential exit from the eurozone – has reappeared on the list of risks. Some analysts believe that the correction on developed markets in April was down to investors’ calculations – anticipating declines following Greece’s exit from the eurozone, they were expecting shares to be traded at much lower prices. Many opinions have been voiced on this issue in recent weeks, some of which have contradicted the blacker scenarios for the financial markets after the Grexit. However, the most likely scenario is that an agreement will be made making the prospect of Greece’s exit from the eurozone more distant. Positive data has been flowing in from across the ocean regarding economic growth, bringing with it a more realistic expectation of increases in interest rates this year (as explained by Janet Yellen – the head of the American Federal Reserve), which should not dampen the mood or lead to a fall on US indexes.

Meanwhile, in Poland the macro prospects could also be driving the shopping fever on the WSE. The growth in GDP could amount to as much as 4 pct, according to economists’ forecasts, growing in each quarter. This would be due to the accelerated investment (the number of companies declaring the suspension of investment programmes has been decreasing – and is now three times lower than in 2013 and twice as low as in 2011. This is resulting in an observable revival in the construction sector. An influx of money to investment funds will also contribute to this growth. This is down to the low interest rates and the greater attractiveness of saving through investment. However, on the other hand it is worth remembering that open pension funds, which are topped up with shares, will be more inclined to sell than to buy.

The end of April and the beginning of May was a period that ended in the ‘green’ on the Warsaw stock exchange. At the beginning of May, the WIG20 reached a level of almost 2,550 points, matching its peaks from the autumns of 2013 and 2014. However, it is still 300 points short of its 2011 value, when the blue chip index reached its top level after the crisis of 2007. Meanwhile, the WIG-Construction index has been approaching its 2011 level, registering stronger growth than the broader market indexes once again. Elektrobudowa’s healthy share performance attracted the most attention over the last few weeks, as investors show their appreciation for the energy sector company’s excellent prospects – the next few years will be marked by the construction and modernisation of many energy plants. The healthy trend was noticeable in its Q1 results – its revenue increased by PLN 60 mln y-o-y and the company generated a profit after its losses in 2014. Shares in
Mostostal Płock also gained in value, a result of its announced dividend payment of almost all of last year’s profits, amounting to PLN 3 mln. The owner of the Płock-based company – Mostostal Warszawa – could also boast excellent results, with an order portfolio worth PLN 3 bln, higher liquidity and a profit instead of last year’s loss. Polimex-Mostostal was also in the green at the end of Q1 – the restructured group registered a profit for the first time in three years (almost PLN 10 mln with revenue of around PLN 510 mln). In the summer the company is planning to carry out a share consolidation, which would mean the group’s exit from the low-valued ‘penny’ companies of the index. PBG’s results were less good – the group incurred a loss of PLN 8 mln with revenue of just under PLN 323 mln. The company has announced that it will be more aggressive in terms of generating revenue and is planning to bid for orders with a total value of PLN 400 mln. Shares in Ulma and Unibep continue to be more sought after – both companies gained 30 pct over the last three months.

May turned out to be the last month of Gant’s presence on the WSE. The Lower Silesian developer, which has entered bankruptcy, has now been delisted. As far as developers are concerned, Dom Development was doing well: its share price increased by almost 15 pct in one month. And this happened in spite of an overall loss for Q1. At the same time investors were satisfied with the news of a dividend payment of PLN 2.25 per share – those entities who hold shares in the company on June 18th will be entitled to the dividend.

Falling prices over at the neighbours

The April correction on the Western European markets had more of an impact on the indexes in Budapest and Prague than in Warsaw. However, it should be remembered that the BUX gained 27 pct over the last half-year, while the WIG20 gained just over 5 pct in the same period. This is slightly more than the tiny stock exchange in Prague, where the PX50 index lost a symbolic 1 pct over the last month.