Boredom is bliss

After the parliamentary elections in France, politics has ceased to loom as largely in the minds of investors as it has done in previous months. The overwhelming success of the new president’s party was received without any major reaction from stock exchanges (as was expected) and in fact pointed more to the possibility of falls rather than driving up purchases. The economic fundamentals are now the main factor driving investor behaviour – and these are looking pretty good for Poland. How the political developments in France will affect the future of the euro zone (there is talk of a unified EU budget and economic policy as well as a two-speed Europe) will become clear over the next few months and only then will it be possible to assess their impact on the stock markets. Over in “basket-case Britain”, Theresa May’s government turned the Brexit negotiations into an even more daunting prospect due to the self-inflicted wound of needlessly calling a general election that robbed her of her parliamentary majority. Meanwhile, the reverberations from the testimony of the former head of the FBI against President Donald Trump, and the possibility of his removal as the head of state, have yet to impact the markets. Investors were more interested in the third increase in US interest rates this year. So far the measures taken by the Fed have been in line with expectations. In spite of some slightly worse data for the US economy, the indexes over there have again hit historic heights. In Poland some stability has returned, but after having broken its records of 2015 and 2014 earlier this year, the WIG index now finds itself 4,000 points short of that level. The Polish Central Statistical Office has confirmed economic growth in Q1 of 4 pct and that this was mostly driven by consumption. Investment is still floundering, even though a stream of EU funds is set to flow through the Polish economy (and stock exchange listed companies) in 2018. Companies that have up until now not been listed on the trading floor are becoming aware of the stronger position of the Warsaw Stock Exchange. The IPO market has revived, with the biggest flotation in history expected to take place during the summer – that of mobile phone operator Play, which should total PLN 2 bln. The value of the total supply of new shares on the WSE from various sources is set to exceed as much as PLN 4 bln. As long as there are additional influxes to the investment funds poised to start shopping, the WIG could mount an assault on its 2007 peak.

Meanwhile, the movements on the sector indexes were slightly bigger than those on the main ones. WIG-Construction registered a loss this time. Nevertheless, after its growth around the beginning of the year, it is still the second most profitable sub-index on the WSE (the first being WIG-Fuel). Budimex’s shares fell sharply, which was somewhat surprising because the company was the only one that might have expected a positive bounce from its Q1 results. The company has continued to win public tenders, including road and railway contracts. Analysts point out that its share price may have slipped back because it grew so strongly in May due to a major dividend payout (PLN 382 mln, PLN 14.99 per share compared to PLN 8 in 2016). The shares of ABM Solid, which is in liquidation open to arrangements (under an agreement with Bank Millennium), gained in value, as did the share prices of Hercules (after good Q1 results) and Instal Kraków. Among developers, Echo Investment was the recommended choice of brokerage houses MBank and DM PKO BP, due to its attractive share price and healthy prospects. In one day the company managed to raise PLN 100 mln from the sale of bonds. Tower Investment, a commercial developer listed on the New Connect alternative stock exchange, is now planning to enter the main trading floor of the WSE, where the company could raise up to PLN 30 mln from the issue of new shares. Marvipol, meanwhile, has decided to spin off its development activity from its car selling business, which is to take place later this year.

Hungarian winner

After its strong recent performances, the BUX index topped the WIG20 again in terms of growth. The Hungarian index increased by almost 4 pct. The PX50 in Prague, however, found itself on the other side of the spectrum, with a decline of more than 3.5 pct. Since the beginning of the year the indexes in Budapest and Prague have increased by 11 pct and 6 pct respectively and the WIG20 by 18 pct. However, the BUX is still the winner in terms of annual rates of return (32 pct vs. 24 pct on the WIG20 and 15 pct on the PX50). The Hungarian stock exchange is buoyant after the publication of some very positive economic data: the GDP of the country grew by over 4 pct in Q1.