Beware of Greeks wanting gifts

The tension related to the situation in Greece intensified all through June. It was only in May that the increasingly likely scenario of a Grexit from the eurozone started to obsess the minds of investors. The decision by the Greek government to discontinue fiscal reforms meant that aid from the International Monetary Fund was stopped. This in turn has led to the de facto bankruptcy of Greece. The government of the country then entered a game of brinkmanship with the European authorities and in the end decided to carry out a referendum anyway, in which its citizens would decide whether to adopt draconian cuts as a ‘payment ‘ for the aid granted. But the situation has long since ceased being one that politicians could control – the closure of the stock exchange in Athens, as well as the banks and limits on cash withdrawals, were not enough to prevent a rejection of the deal on offer in the referendum. The tension, the twists, the never-ending “last chance saloon” negotiations – even resulted in the American S&P500 index falling at the end of June to its lowest levels in three months. All this commotion has been taking place as moderately good economic data was published, including for the eurozone. In Poland, Q1 GDP growth accelerated to 3.6 pct per year and the level of investment expenditure (including that on machines and construction equipment) suggests that this has become a more durable trend. This should be a boost for the Warsaw stock exchange, even though a new worry, which has not been taken into consideration so far, has appeared on the radar of ‘local’ risks. This is the uncertainty surrounding the autumn parliamentary elections. After the victory of Andrzej Duda in the presidential race, analysts are claiming that this points to a victory for the Law and Justice in the parliamentary elections. This could signify the implementation of its election promises, which could in turn lead to the weakening of the banking sector on the WSE (i.e. the party’s prescription for solving the problem of mortgages denominated in Swiss francs). The banks are the strongest represented segment on the WSE and usually determine the direction in which the entire stock exchange is heading.

Each of the main indexes we are concerned with fell. Within six weeks the WIG20 lost nearly 10 pct from its highest levels since 2009. The WIG fared only slightly better (a decrease of 7 pct). The sector indexes were relatively stronger. The construction sector decreased by 6 pct and its development counterpart by 3.5 pct. However, the WIG-BUD still remains close to the level of 3,000 points, which is its highest for the last three years.

Gant withdrew it shares from the WSE on May 25th. This is the result of the problems faced by the Lower Silesian developer, which have ended in the decision to start bankruptcy proceedings after its failure to service its debt and conflicts among its shareholders.

But the stock exchange clearly abhors a vacuum, because a new company has emerged on the trading floor: Atal, which listed on June 15th. The size of its public offer, as well as the fact that a new issue is on the table, require a closer look. The company raised PLN 143 mln from the flotation, which taking into consideration that this is not such an easy time for public offers along with the current lack of enthusiasm among investors for new share issues, could be regarded as a success. Even more so given that the reduction rate exceeded 80 pct in the tranche for individual investors (this means that investors who subscribed for shares finally received only 20 pct of what they wanted due to the high demand). The company wants to use the funds raised for the purchase of land in Warsaw and Kraków; according to the company’s strategy, the annual sale of apartments could reach 2,500 units in 2020. By comparison, Dom Development sold almost 1,900 apartments in 2014 and representatives of J.W. Construction also announced sales of around 2,000 units. Rank Progress stood out among the other developers (who continued to diminish in value), even though this was the continuation of its positive trend over the last few months – it has gained 30 pct since the beginning of the year. It is difficult to find such a clear leader over the last few weeks among construction companies. Only Mostostal Warszawa finished the period in question in the green. Meanwhile, Polimex Mostostal is to announce a new strategy over the summer. According to market sources, the former construction giant will now focus exclusively on the power and petrochemical construction sectors. The company will also leave the group of ‘penny’ companies: a consolidation of its shares is to take place in the summer on a 50:1 basis, which in fact means the ‘growth’ of its price to app. PLN 2 per share.

Resistant BUX

The situation in Greece continued to afflict European markets. In June the PX50 index lost 3 pct, and in spite of the fact that the Czech economy is one of the fastest growing in European Union (expanding by over 4 pct in Q1 2015), this data could not prevent falls on the small stock exchange in Prague. The BUX has seemed to be more resistant to decreases resulting from the potential Grexit – the Budapest index lost only 1 pct in June. The Hungarian economy is also showing excellent growth of 3–4 pct. Since the beginning of 2015 the BUX has increased by as much as 30 pct.