A good start for the sector

Stock market report
In the first weeks of 2021, the Warsaw sector indices – the WIG Bud and WIG – both rose. Real estate prices actually went up by 8 pct, significantly higher than the WIG index. Cautious optimism reigns on the stock markets across the world, since everyone is hoping that the economic activity last seen before the outbreak of the pandemic is set to make a return in the second half of 2021

Since the beginning of the year the global stock exchanges have been buoyed by the more optimistic mood generated by the acceleration of vaccination programmes, fuelling the hope that economies will themselves will eventually be able to shake off Covid-19. Even if things have to get worse before they get better, the restrictions imposed due to the pandemic should start being lifted in the second and third quarters. According to the IMF, the global economy is expected to grow by 5.5 pct this year after having contracted by 3.5 pct in 2020, thus reversing the previous projections of continued economic decline. It is also predicted that the US economy will recover more quickly – as will emerging markets. The return to normality, however, is expected to be slower for the euro zone. The one scratch on the prediction lens remains inflation – the economic bounce-back could lead to less activity from central banks (which have partly been responsible for the boom on the financial markets) and, in the longer term, this could result in shares becoming less attractive. At the moment such prospects are being treated as a signal to make corrections and so the stock exchanges in the US have already hit historic highs in 2021, partly due to the good company results in the fourth quarter.

The spectre of inflation, however, has become a bit of an issue in Poland, which has the fastest rising prices in the EU. For the moment, however, the country’s interest rates remain at record lows and there’s no sign that this situation is about to change. GDP fell in 2020 by 2.8 pct, but this year should make up for its losses in what is expected to be the best recovery to pre-pandemic levels in the EU. Since the beginning of the year, the wider market indexes did not seem quite so impressive – the WIG and WIG20 didn’t grow very much over the first six weeks, but the sector indexes looked a lot better: the WIG-BUD now stands at 4,000 points higher than it did in 2011, in healthy contrast to the weakening figures for building and construction. These slumped by 10 pct y-o-y in January after having fallen by 2.2 pct over 2020. For this year too, the figures could be negative, thus supporting those who predicted that the building and construction sector would only feel the negative effects of the pandemic after a delay. And this scenario look all the more likely when you take into account the fact that the engineering sector has been unsettled by possible delays to railway investments, as evidenced by the slew of tenders currently being awarded for considerably less money. The financial standing of local authorities could also have a highly negative impact since, due to the pandemic, they are likely to reduce the levels of their investment. Such circumstances could continue through 2021 and 2022. Over the slightly longer term, companies that specialise in investing in the energy sector are handily placed to do well, as the demand generated from the need to carry out energy transformation projects is likely to grow. In comparison to the rest of the segment, stock exchange listed companies are looking particularly healthy due to the solidity of their finances and their large order books.

The big news of the last few weeks has been the announcement that stock market giant Budimex has gone through with its plans to sell its residential development business, Budimex Nieruchomości, for PLN 1.5 bln to Czech-group Crestyl. According to previous stock market announcements, Budimex is now to further develop its FB Serwis subsidiary, which specialises in road maintenance and waste disposal (constructing incinerators) – and this will mean taking over more companies. Erbud is also looking around for an attractive niche, this time in the assembly of wooden modules – a segment that has been growing in popularity in Western Europe. The company aims to invest up to PLN 100 mln in this area over the next three years and is to finance this through issuing bonds or even by selling a minority stake in PBDI, which is active in the renewable energy market. Unibep has already invested in the module construction market and is now taking aim at the Scandinavian market.

WIG Developers has also been going through something of a growth spurt. Since February 2020 it has risen by 40 pct, with this latest surge having resulted from the extremely good home sales figures for last year, which have just been released. According to business journal ‘Parkiet’, sales fell in 2020 by just under 7 pct, while for many developers the fourth quarter was the best of the entire year. Improvements in the job market, the loosening of bank mortgage requirements in H2 2020 and the continuing low interest rates have all driven up the demand for housing. Experts are now predicting that sales will continue to grow in large cities over the next two years, but eventually developers’ shrinking land banks will become a problem. As has been the case with construction companies, there have also been several mergers and acquisitions among developers. Echo Investment has joined forces with Archicom to create one of the largest residential developers in Poland. The transaction has yet to be approved by Poland’s competition authority UOKiK. Meanwhile, Polnord is to leave the Warsaw Stock Exchange after 22 years. Majority shareholder Cordia of Hungary has announced that it is calling in the outstading shares and will purchase them from all remaining investors (who together currently hold 4 pct of Polnord’s shares). (Mir)

Making the same moves

Since the beginning of the year, the stock market indexes in Budapest and Prague have been behaving in exactly the same manner as those in Warsaw – the BUX in Budapest has risen by 2.5 pct and the PX50 in Prague by 1.5 pct. The Czech economy saw a rise in GDP in the fourth quarter of 2020 of 0.3 pct, whereas in Poland it fell by 0.7 pct – but in comparison to the rest of the region this was still quite weak. The Hungarian economy grew by 1.1 pct while in Romania the GDP growth was a whopping 5.3 pct.