Springing back to life

Although there were few reasons to be cheerful around the beginning of the year – mainly due to the health of the European economy and the fraught state of US-China relations, which could have a profound impact on the global economy – the outlook in early spring turned out to be much rosier for investors. First of all, the indications are that the trade war between the world’s two largest economies looks like fizzling out, with both parties likely to come to terms before the end of spring, which should add more fuel to the good mood on the stock markets. This promising news from the negotiating table has been accompanied by signals about the improving state of the Chinese economy with its increasing exports, which has been interpreted as a signal fto buy stock. As for the US economy, analysts have noted interest rate hikes coming to an end, which also tends to give the bourses a boost. But the uncertainty that there is has mainly been centred on Europe, and more specifically the eurozone. The weak forward indicators from the industrial sector (and the lowest for Germany since 2012) are still giving investors the jitters. The political risks receded slightly after Brexit was postponed for another six months, improving the mood of European investors unnerved by the lack of a resolution to this issue. Many economists, as well as leading financial market institutions (e.g. the International Monetary Fund), are of the opinion that H2 should be better than H1. But the IMF has continued to scale down its growth forecasts for this year, especially for the eurozone economies. For Poland, the fund is predicting a growth rate of 3.8 pct (actually an upward adjustment), but this is still weaker than the forecasts of most local economists (around 4 pct). The Polish economy is still growing fast, while the general election campaign and the rather generous promises of the ruling party (increases in pensions, PLN 500+ for a first child) could keep consumption high for the next few quarters. This should help activity on the WSE, although investors are mainly looking at issues that could impact it in the long-term. Meanwhile, with the broader market indices remaining stable, WIG-Construction and WIG-Real Estate have recorded 1–2 pct increases over the last month. Their performances are even more spectacular for Q1 as a whole. Their 13–15 pct growth since the beginning of the year is clearly superior to the 6 pct and 4 pct seen by the WIG and WIG20 respectively. Developers are still feeling positive about the residential market. Atal, which recorded an impressive rise in its share price in recent months (after sliding down to PLN 27.5 in January, by April it had climbed back up to more than PLN 40), can now boast a high net margin of 20 pct as it announces even greater numbers of units for sale in 2019 and 2020. Even the quantitative Q1 sales results of the developer turned out to be slightly better. Another company that is looking to the future with some confidence is Marvipol – in 2018 it increased both its revenues and profits, recording good results not only in the residential segment but also in ​​warehouses and logistics. Construction companies with development divisions have also been thankful for the boost they’ve been giving to their results. This has been the case with Unibep, which has a wooden housing module business and provides general construction services abroad. But it was the development side of its business that was responsible for half of its gross profit in 2018. After many months of gradual share price reductions, its stock finally stabilised in 2019 and actually rose in value in spring. In the media, its managers have been voicing scepticism about the benefits of its stock exchange listing and suggesting a possible buy-back. In April such a buy-back was carried out by J.W Construction, whose main shareholder and founder – Józef Wojciechowski – now holds a stake of almost 90 pct in the firm. The announcement of a buy-back led to a sharp spike in the share price. The Q1 sales results of J.W. Construction, however, turned out to be 34 pct down on last year’s and thus the company was among only a few WSE-listed developers that sold fewer apartments than in Q1 2018 (Lokum and Inpro’s figures were also weaker). Q1 was also initially dominated by the share performance of construction giant Budimex, which reported that its net profit had halved while the figure for its construction business was down by as much as 85 pct. This news naturally depressed Budimex’s share price as well as the company’s announcement that its dividend payment from its 2018 profits could be the lowest for four years. (Mir)

Better also next door

The BUX in Hungary saw the biggest rises once again, although its 3.5 pct increase over the month was not that much higher than those of the Prague and Polish stock exchanges (around 2 pct). The Budapest Stock Exchange can also boast double-digit growth since the beginning of the year (10 pct), although in this regard the Czech PX 50 index actually surpasses it (12 pct).