Anxiety sweeps through the stock markets

Growing Apprehension over the huge sovereign debts of the eurozone is continuing to impact the financial markets. After three relatively good weeks in October, the next month saw sharp falls

Fortunately for investors, the weekly decreases were not as big as those registered in July or August, for example. Still, the mood remained sombre, although the reason for this has changed. Greece continued to be the centre of attention. An agreement was reached at the end of October - Greece's debt is to be reduced by EUR 100 bln to EUR 250 bln while the owners of the securities of the Greek government (mainly banks) will have to take losses of around 50 pct on these assets. The long awaited deal gave the global stock exchanges a short breather. The only problem being that the agreement is extremely difficult to implement and so investors started to get the jitters as the next act of the Greek tragedy began to unfold in November. The suggestion of holding a Greek referendum over the necessary reforms, the growing popularity of the notion of reverting to the drachma, and finally the resignation of the government - all these factors conspired to spook the indexes and prompted further waves of selling. The contagion then spread from Greece to Italy, which saw the value of its bonds drastically reduced on the financial markets. The issue of Italy was even more unnerving for the stock exchanges due to the size of its economy, and the situation became so serious that prime minister Silvio Berlusconi was forced to hand in his resignation - the second prime ministerial victim of the debt crisis after George Papandreou of Greece. The problems on the financial markets have now started to be reflected in the real economy, as Euroland faces the spectre of another recession. Poland continues to surprise us against this background, with its increased industrial production and retail sales suggest that in Q3 the economy was still developing at the dizzying level - compared to much of Europe - of 4 pct. All this was accompanied by good Q3 results, which turned out to be better than analysts' expectations in many cases. However, this did not prevent the indexes from slipping - although in a minor way - as the WIG and WIG 20 slid back by 2.3 pct and 2.7 pct respectively over the course of the month. The trade indexes were as usual weaker, down by nearly 7 pct in the case of WIG-BUD and by as much as 13 pct in the case of WIG-Developers (the sub-index is currently setting records for historical lows).
The end of October was dominated by the publications of Q3 financial results. Budimex, whose results exceeded expectations, looks to be in good shape. In total the company earned PLN 194 mln over the first three quarters of the year with revenues of PLN 3.82 bln, and its profit for the whole of 2011 could be close to that achieved in 2010 (PLN 267 mln). Taking into account an expected decrease in infrastructure revenue, the company wants to increase its sales in the development segment and is extending its land bank, among other things, in order to achieve this. Another factor strengthening the diversification of its revenue is the railway sector. In November the company announced the finalisation of the purchase of the PNI engineering company from Polish State Railways (PKP), which came with an order book worth PLN 1.4 bln. Budimex's rivals are also not wasting time. PBG has announced a share bid for Rafako, which could give the group led by Jerzy Wiśniewski a 66 pct stake in the Racibórz-based company. The takeover would lead to a restructuring of the group, of which Rafako is intended to play a crucial rôle in the energy segment. According to analysts, it is companies active in this sector that are regarded as tasty morsels for investors. Polimex Mostostal generated a net profit of PLN 15 mln, slightly more than analysts had been expecting. Unlike Budimex, its forecasts for the whole year project a profit lower than the PLN 109 mln achieved in 2010. As for developers, GTC's weak results came to the forefront. This company surprised many investors with a loss of PLN 574 mln, whereas a year ago it made a profit of PLN 30 mln. GTC's share price lost more than 25 pct over the month. Dom Development enjoyed some very good results - higher revenues, sales margins and consequently also a higher profit and an increase in the value of its shares. (Mir)

Resilient Hungary, weak Czech Republic
This time it was the Hungarian stock exchange that turned out to be the most resistant to the turbulence on global markets, with the BUX index down by only 1.4 pct over the course of the month. The PX index of the Prague stock exchange, however, fared considerably worse, sliding back by over 8 pct. And the Hungarian stock exchange also bounced back more strongly when the debt crisis began to move into the background, despite the fact that Hungary is itself subject to an International Monetary Fund financial aid programme.