A good and a bad year

The last few weeks of 2017 were not marked by a buying spree on the Warsaw trading floor. The WIG and WIG20 fell back slightly, but held onto the advances they had made in 2016. Looking at the increases over the whole year, it would be difficult to call 2017 an unsuccessful or even a flat year. So let’s take a look at the forecasts that were printed in this column about a year ago based on analysts’ expectations published in ‘Gazeta Giełdy Parkiet’. The WIG was expected to close 2017 at a maximum level of 57,000 points and the WIG20 at 2,300 points, with the most optimistic forecasts postulating a figure of 2,400 points. In fact, the main stock market index is now preparing itself for an assault on its historical peak of almost 64,000 points and the WIG20 has already surpassed 2,500 points several times, ending the year a few dozen points less. The growths of 23 pct and 26 pct respectively are impressive because this guarantees profits that have not been seen on the WSE for quite some time. To put this in context, all we need to do is look at the main global indexes. Of course, there has been a bull market on the US stock exchange since 2009 and since then the American indexes have been hitting record highs almost every year. But 2017 was a favourable year for emerging markets. Even though it often used to be the case that the Polish indexes would lag behind the leading ones, last year saw the end of this unlucky streak and was the best the WIG20 and the WIG had seen for seven and five years respectively. This was very much down to the favourable macro economic climate (even though it did not feature investment by private companies and did involve some tensions on the job market, which particularly affected the construction sector), as well as the rather healthy fiscal situation combined with the exuberant mood of Polish consumers, who have jobs, are making money and buying stuff. This in turn has helped developers, as well as almost all retail firms, with last year’s debutant Dino Polska turning out to be the best performer. According to a number of analysts, the markets also showed a certain indifference to political events in 2017. Of course, Investors are paying attention to the whole Donald Trump circus and scrutinising election results (such as those that took place in France and Germany) as well as the Brexit negotiations, and they are not immune to jitters over developments in North Korea or reports of bomb attacks, but at the same time they are buying shares and this is pushing stocks up. The strength of the economy has been the main factor behind this, particularly in the US, Germany (which is especially important for Poland) and China. The world economy keeps on growing, helped by the central banks, as they ensure there is no shortage of cheap money.

It was a good year for developers – WIG Properties was the fifth best sub-index in terms of the rate of return, which exceeded 20 pct (with the clothing segment enjoying the highest – 45 pct). Meanwhile, the construction sector finished the year in third last place, slightly in the red. PBG’s health looks particularly precarious, suffering one of the greatest decreases in value, and the end of the year saw its withdrawal from the WIG index. While this is an extreme example, in 2017 many other companies suffered sharp falls in their share prices, such as Mostostal Warszawa and railway companies Trakcja, Torpol and ZUE. Budimex, the clear leader of this sector, actually saw a rather modest appreciation in its stock, despite the fact that this was the company that first rang the alarm bells about the perilous state of the entire industry, despite there being yet more EU funds in the offing and a boom in public projects. However, it was not an unsuccessful year for everyone – Dekpol, a general contractor specialising in industrial and sports facilities, saw the greatest share price rise (by 260 pct).

At the beginning of January the first few residential developers published their apartment sales figures for 2017, and as expected these have been excellent. Atal’s were up by 14 pct, Dom Development’s by 45 pct, Archicom’s by 52 pct and Lokum Deweloper’s by as much as 63 pct.

Another commercial developer appeared on the stock exchange at the end of the year. Tower Investments, which carries out projects for discount chains and petrol stations, is the latest company to transfer from the New Connect market to the WSE’s main trading floor. The company raised PLN 22.5 mln from its listing.

The WIG20 was the clear top performer in the region over the year, pushing the BUX into second place. The Budapest index grew by over 20 pct, while the Prague Stock Exchange finished 2017 with a growth of 14 pct.

How the global indexes grew in 2017

MSCI China (China) + 50 pct BIST (Turkey) + 45 pct Bovespa (Brazil) + 27 pct Dow Jones (US) + 26 pct DAX (Germany) + 14 pct CAC 40 (France) + 10 pct FTSE 100 (UK) + 7 pct WIG 20 + 26 pct