Weak ending to a weak year

December was a very weak month for investors on the Warsaw Stock Exchange. The main reason for this was the tense political situation, which transmitted jitters onto the capital market. The wave of resignations and dismissals in state-owned companies was just one factor contributing to the instability on the WSE, which together with the measures pushed through by the ruling party have seriously weakened the major WSE sectors. One of these is the bank tax, which is now one of the highest in Europe (assets are also to be taxed, rather than just financial transactions), which also affects insurance companies. The policy to rescue the mining industry is still posing a threat to the power sector and investors in the largest Polish company on the WSE, KGHM, are wondering whether the ‘copper tax’ will be lowered as promised. The record high budget deficit (PLN 55 bln) on top of all this is now raising concerns about the fiscal stability of the state budget. Unfortunately, the end of 2015 was another in a series of blows that started with the previous government’s decision to phase out the open pension fund system. In the second week of December, the WIG20 fell by almost 6 pct, which was the same as in September 2013 following the initial decision about open pension funds. This was all accompanied by rather good macro data for retail sales and industrial production (which made it possible to make up for the losses just before Christmas). However, this does not change the fact that the final few weeks confirmed that the last year was a weak one for the stock exchange in Warsaw. The largest companies’ index lost almost 20 pct and was only better than the stock exchanges in Greece and Ukraine. The markets in the USA closed the year in a stable manner (with a rate of return of around 0 pct), while the German and French stock exchanges (the largest companies’ indexes) gained around 10 pct. The broad market index in Poland was also down over the year, by over 12 pct, falling to its level of July 2013. The WIG20 is now at its level during the slump in 2009. The sector indexes actually look very good against this background – the WIG-Bud gained 37 pct over the year and the developers’ index was up by almost 16 pct. For the construction sector, its index has been the highest since the end of 2011. The leaders of the construction industry in 2015 included Mostostal Warszawa (its shares gained in value by 116 pct) and Elektrobudowa, the value of which increased by over 75 pct. Budimex, the analysts’ favourite, improved its value by almost 40 pct. The companies involved in infrastructural projects for the railway network – Torpol, ZUE and Trakcja – also did well. Meanwhile, Unibep, Ulma and Mostostal Płock enjoyed 30 pct increases. Companies such as Erbud and PBG, however, were not blessed by such increases. The other former giant (apart from PBG), Polimex Mostostal, is hoping to rebuild its position over the next few years following extensive restructuring and its exit from the group of ‘penny’ companies (thanks to a share consolidation).

Polnord, whose share price grew by over 130 pct in 2015, has emerged as a clear leader among developers. Some analysts are claiming that it still has the potential for further growth in its share price. The price of J.W. Construction increased by 95 pct, while GTC and Robyg also had a good year. However, investors who hold shares in Rank Progress (in spite of its good end to the year), Reinhold and Polski Holding Nieruchomości will not consider the last twelve months to have been particularly successful.

Looking back on 2015, it is worth mentioning the market debuts that took place, even more so considering the fact that two interesting companies from the development sector listed at the end of the year. A total of 30 new companies appeared on the WSE, reflecting the weaker condition of the stock exchange, but this was far from a poor show and is in fact the highest figure since 2010. As far as the industries covered by ‘Eurobuild’ on the WSE are concerned, Atal, Lokum Deweloper and Orion made their debuts. Atal raised PLN 143 mln from the WSE for its development projects, listing at the price of PLN 22 – and it was not much lower at the end of the year at PLN 21.5. Lokum Deweloper made its debut in weak market conditions in December. The company sold 3 mln shares after hoping to sell 5 mln. The maximum price in the offer was reduced from PLN 20 to 15 with the ultimate issue price down at PLN 12. At the opening the company became cheaper – PLN 10 per share, but its price had rallied slightly to PLN 12.5 by the end of the year. Orion Investment also listed on the WSE before Christmas – this was admittedly a ‘transfer’ from the NewConnect market, but it is quite possible that Orion will be looking for new funds next year by issuing new shares.

Hungarians the best

The Hungarian BUX was without question the leader in the region, growing by 43 pct in 2015. While on the Czech PX50 it was only possible to earn 1 pct, but even this was considerably better than the losses suffered by the WIG20, which amounted to almost 20 pct. After a few years of stagnation the Hungarian index returned to its level of the boom of 2010/2011 and is only 10 pct short of its peak from before the crisis. By comparison, the WIG20 is 55 pct lower than its level of 2007.