No correction needed

Following a very good December, particularly on the Warsaw Stock Exchange, it would have been justified to expect some kind of correction. On the contrary, January and the first half of February enjoyed undisturbed growth and the WIG index even came close to its 2015 peak in mid-February, while the WIG20 has been approaching its highest level of 2016. This was all accompanied by a 50 pct growth in turnover on the previous year! The larger investors, mainly funds that are increasing the proportion of Polish shares in their portfolios as they turn to emerging markets, were followed by individual investors, who in a January survey turned out to be more optimistic than they have been since April 2015 (only 22 pct expected the indexes to decline, while over 60 pct expected growth). There is much evidence that foreign investors are looking to invest in the Polish economy, which in spite of the slightly lower growth rate in 2016 compared to expectations (2.8 pct) – is still one of the most attractive economies in Europe (among comparable economies only Romania is undergoing a faster pace of development). The growth has been driven by the resolution of the issue of mortgages denominated in Swiss francs, which had been a burden to the heavily WSE-represented banking sector. A Polish economy driven by growing consumption and a healthy situation on the job market is expected to lead to a bounce in investment in 2017, which should also be reflected in the results of construction companies. Unlike the situation over the last few years, the Warsaw Stock Exchange has been performing better than other markets. Nevertheless, all over the global indexes were in the green. The main indexes in the US have hit historic peaks while investors pin their hopes on radical changes announced by Donald Trump (tax cuts and infrastructural investment), while the good Q4 figures should additionally fuel growth. Even though politics has cast a shadow on the future of the European continent (particularly the forthcoming elections in some of the largest EU countries), the European economy is doing well and – according to the forecasts of the European Commission – 2017 is set to be the first year in the last ten when all EU countries will register GDP growth.

In Warsaw the double-digit growth of the WIG and the almost 10 pct increase on the WIG20 were exceeded by the construction companies’ index, which gained 15 pct and came close to its highest levels of the last six years. WIG-Real Estate (formerly WIG-Developers) exhibited lower growth dynamics, increasing by less than 5 pct. This could be explained by the very strong performance of the index in the last quarters, which limited its growth potential. However, developers have had a great year. Their 2016 sales results have mostly been in the double-digits. According to a report published on the Rynekpierwotny.com portal, the most successful company in terms of the number of apartments sold was Murapol, which is listed on the alternative Catalyst market and has sold more than 3,000 apartments. Robyg and Dom Development were also in the top positions, approaching 3,000 sales, but failed to reach this figure. Meanwhile, Archicom and Echo Investment were able to boast the highest growth dynamics. 2016 was a weaker year for Ronson and Budimex’s development company. As far as J.W. Construction – a veteran among stock exchange listed companies – is concerned, there was unexpected news about the share call of its main shareholder, Józef Wojciechowski, the owner of a 66 pct stake in the company. According to specialists, the price offered (PLN 4.7) is not attractive and is below analysts’ recommendations. Whether he will increase the price will become clear at the beginning of March, because subscriptions can be made until the 15th of this month. When it comes to construction companies, the share price for most companies grew. Polimex-Mostostal was the clear leader and it will also be receiving PLN 300 mln from a special issue addressed to power companies. Apart from that the company has signed a new agreement concerning the repayment of debt and obtained a larger guarantee facility. In spite of its very high share price increases, Polimex has not been enjoying good press recently – analysts point out that it has been limiting its contacts with the market, and the prevailing view seems to be that its acquisition by power companies does not bode well in the long-term for Polimex, as it is currently limited to servicing large power companies supervised by the state.

Neighbours doing less well

This time the WIG20 outdistanced the Hungarian BUX, which had a moderate beginning of the year. A 4 pct increase only allowed it to push its recent record highs to the limit – and this certainly differentiates Budapest from the Warsaw index. Meanwhile, the stock exchange in Prague gained slightly more with a constantly low turnover. Interestingly, unlike the Warsaw Stock Exchange the trading floor in Budapest registered a decrease in turnover of almost 20 pct (turnover on the WSE increased by 50 pct).