Attack of the wobbles

The escalation of the clash between the US and China moved into the foreground for stock market investors. The US administration has been talking about tariffs on as many as 1,300 Chinese products and China has reciprocated with similar threats. While the numbers continue to be bandied about and the jostling continues, many analysts have pointed out that all this is taking place in virtual space and is probably just a prelude to negotiations that will redefine the relations between the world’s two most powerful economies. For now, such declarations of intent have yet to be realised, but the uncertainty they engender is often enough by itself to take its toll on investment decisions and to have a rather negative impact on the company valuations. The situation has not been improved by the Cambridge Analytica scandal involving the leakage of data on millions of Facebook users, which Facebook itself seems to have played a part in. As a result of the furore the social network provider has seen its value plunge by almost USD 100 bln, while other giants such as Google and Twitter have also lost ground. Politicians have been alerted to the issue, hauling Facebook CEO Mark Zuckerberg before a US Congressional committee for a customary grilling. Another factor sowing unease on the global stock exchanges has been the ramping up of tensions between Russia and the Western world. The synchronised diplomatic action in response to the poisoning of a former Russian spy in the UK (allegedly carried out as an act of revenge by the Russians) combined with sanctions directed against Russian oligarchs, has led not only to a slump in the Russian market but has also increased fears of another cold war. The tension was ratcheted up even further by the bombardment of Syria by the Western allies in retaliation for the regime’s continued use of chemical weapons in the country’s civil war. As all these alarming bells rang out in recent weeks, traders have been turning to safer forms of investment. Despite all that has been happening on the political scene, the global economic situation has been far from unhealthy, although a slowdown has become evident in recent weeks in the forward indicators for Europe and elsewhere. For now, however, the Q1 figures for US companies confirm the continuing acceleration of its economy and it has to be borne in mind that the predictions for 2017 were very high for developed countries – so these economies still have a great deal in reserve.

Few conclusions can be drawn from the Warsaw Stock Exchange in recent weeks, where change has been so dramatic that the graphs are flatlining. Buyers lack direction after the recent correction, which has been compounded by the ambiguous mood hanging over the global markets. In such a context, the minimal changes on the main indexes are unsurprising. A slightly greater correction (more than 4 pct) impacted the construction companies’ index, even though since the beginning of the year, construction has actually been doing better than the broader market. Developers have been doing better still, as their market booms. But coming back to the construction sector, on the day before the publication of their Q1 results it’s worth recalling their generally positive Q4 data – especially their relatively healthy cash situation. The most interesting news has been all about Polimex. The company rather surprisingly lost a tender to build an extension to a power plant in Ostrołęka, considering it is actually an operator in the energy sector, after all. However, taking a look at both bids – the winner and the one submitted by Polimex – it becomes clear that the latter didn’t stand a chance (PLN 6 bln vs. PLN 9.5 bln). The fall-out from this was a nose-diving share price and then the resignation of its CEO. Polimex representatives insist that the former construction giant has not yet given up the ghost and will keep on fighting for contracts at home and abroad, and that its order portfolio for this year is worth app. PLN 1.5 bln. Mostostal Warszawa, with a share price rise of more than 40 pct, was at the other extreme. Its court victory in securing the return of more than PLN 30 mln from a Szczecin waste treatment plant, the winning of a road contract worth PLN 240 mln and the announcement that it would be restructuring its order portfolio, have all left a positive impression on investors. Even the recommendation to leave the company with a measure of profit (of just PLN 2.5 mln) did not stop its price surging. Turning to residential developers, according to rynekpierwotny.pl, in Q1 2018 there were signs of a slight slowdown, with most companies experiencing a fall in annual terms. Large increases were only enjoyed by Lokum Developer, Inpro and Echo Investment. In absolute terms, most apartments were sold by Murapol, Robyg (as it de-lists) and Dom Development.

Making up for lost ground

The BUX index in Hungary increased by more than 3 pct over the last month, which partially helped to make up for its February and March correction and improve the balance from the beginning of the year. The indexes were lifted somewhat by the general elections results, which the Fidesz party won as expected (and will rule for a third term), confirming the country’s political stability. Furthermore, the Hungarian economy continues to grow under Fidesz, so all the optimism does seem justified in this context. The PX50 index in Prague grew more modestly (1 pct) over the month, but since the beginning of the year the Czech Stock Exchange’s main index has outdistanced those of the Warsaw and Budapest stock exchanges by growing by more than 4 pct.