Against the tide

The stock exchanges, particularly those of the emerging markets, have yet to react to the correction in fuel prices, since these had been a factor in propping up the indexes over the last few weeks of winter. Some analysts believe that such an effect is being put off and that Q2 will be a time of selling and profit taking. Particularly taking considering that the risk factors will begin to accumulate. As well as the sluggish revival of the eurozone (which is having a definite impact on the Warsaw Stock Exchange) and the European Central Bank’s attempt to stimulate it (negative interest rates and cash pouring in order to support the economy), there is also the prospect of the Brexit. The referendum that is to take place in June will continue to take its toll on the European stock exchanges, and this effect will not be exclusive to Europe. The UK’s extensive economic integration with the European Union makes the economic consequences and those for the capital markets hard to predict. In such a situation feelings of insecurity intensify and many more shares are likely to be sold than bought. In the longer term the markets will also be waiting for political events to reach their conclusion across the ocean, in the form of November’s presidential election in the US. The likelihood of Donald Trump still being in the race to the White House could also swing investors’ moods and pull the indexes down. Even the recovery of the Chinese economy, which according to analysts is the most keenly awaited impulse for growth stimulation among investors, may not be sufficient to counteract the negative mood brought on by the political insecurity. The situation is similar in Poland. The relatively healthy condition of the economy, which is confirmed by the PMI results indicating the further growth of Polish industry, could be moved into the background by the continuing political tensions. Even more so considering that analysts expect a collapse to occur on the currency exchange market in May, when one of the three most important rating agencies – Moody’s – publishes its assessment of Poland’s credit worthiness. In January an announcement by another ratings agency – Standard&Poor’s – resulted in a revaluation on the currency exchange market and the WSE. Investors could decide to cash in on their shares in anticipation of Moody’s announcement. However, the Warsaw stock exchange has for the moment managed to defend the advances it gained in the winter. The WIG20 is close to the level of 2,000 points, while the WIG stands at around 50,000 points. The March and April growth did not exceed 2 pct and current political events (including the resolution of the European Parliament on the Constitutional Tribunal in Poland) did not result in any increased nervousness. The sector indexes also strengthened slightly – the WIG- Construction by nearly 2 pct and WIG Developers by almost 4 pct. Wrocław-based residential developer Archicom decided to take advantage of the slightly better mood on the market and made its debut on the WSE having raised the rather substantial sum of PLN 72 mln in a public offering prior to it. The company can boast the rather large scale of its current operations (611 apartments sold in 2015 and from 2017 it aims to sell more than 1,000 apartments per year), and this is unsurprising in what is a boom time for resi-developers. This can be seen from the sales results for Q1 2016: the vast majority of developers enjoyed price growth – sometimes of several dozen per cent in some cases. Robyg was one such case, as were Dom Development and Atal. Only Budimex Nieruchomości will not regard Q1 2016 as such a successful period – its sales decreased by 36 pct (according to data collated by the Michael Strom brokerage house). The sales projections of Budimex Nieruchomości, however, remain impressive – 2,000 apartments sold in 2016. Wikana, on the other hand, has already regained its former vigour, with its good sales results making possible a return to its share price of last summer. Polnord’s shares also increased in double-digit terms. Under the group’s new management (since the end of last year) the company has declared its strategy for the next three years, according to which its revenue is expected to grow to PLN 500 mln per year and its sales to 1,500 apartments per year. Only four companies in our list suffered losses between mid-March and mid-April. The performance of the construction sector was slightly worse as the larger companies (Budimex, Mostostal Warszawa and PBG) were hit by small revaluations. The next few weeks will be marked by the publication of Q1 2016 results.

Hungary back to pre-credit crunch heights

The Hungarian BUX index nhas ot only defended its early year surge, but has actually built upon it. Its growth of almost 6 pct over the four week period pushed the index up to the level of 27,000 points. The last time it reached such heights was before the credit crunch (in contrast, the WIG20 was close to 4,000 points at that time but is now heading for 2,000 points). The Prague stock exchange remained stable with minimal losses. The PX50 index has gained only 3 pct over the last three months and continues to be clearly weaker than Warsaw’s WIG index.