Construction turns a corner

The end of May and the beginning of June witnessed a phenomenon that had not been seen on the Warsaw Stock Exchange for a long time - the Polish trading floor behaving differently to the main stock exchanges abroad

When the indexes of the biggest global exchanges each lost app. 2-3 pct during the two weeks around this period (and the Chinese stock exchange lost over 5 pct), the Polish indexes (the WIG and WIG 20) each gained app. 1 pct. Foreign stock exchanges were pulled down by the fiscal problems of the Western economies (the fight for budget reforms in the American Congress and the lowering of the ratings of more countries, including Italy). The rises in Poland were facilitated by good economic data (an increased in Q1 GDP to 4.4 pct and the enormous 18 pct growth in retail sales in April). Investors started to believe that the forecasts of around 4 pct economic growth were actually realistic. However, the bad news reached investors on the WSE just before the second half of June and was compounded by the fourth increase in Polish interest rates this year. Rates went up because inflation has been the highest for ten years (5 pct in May). This was brought about by the escalation of the Greek problem: the tension, which moved from the corridors of power to the streets, weakened the euro and the stock exchanges of emerging markets considerably, including the WSE. Nevertheless, the performance of our four indexes for the last month was rather good - a slight improvement in the two indexes of the broad market, which was more-or-less followed by the trade indexes for construction and development. In particular, the minimal growth of the former represents a considerable change, as the construction sector has definitely been in the doldrums in the last few months. However, the old saying 'growth comes after a period of strong declines' had to finally kick in at some point in the case of the construction business. And so in late May/early June, analysts were able to claim that the prospects of construction companies were becoming more and more attractive and started to advise investors to give both sectors a closer look. This was Dom Inwestycyjny BRE Banku's advice in its monthly report, which suggested balancing investment portfolios with representatives of both the construction and development sectors. Analysts expect the results of the construction sector to improve as soon as in Q3 for small companies, at the same time predicting that the summer will be full of positive news about projects for the power industry and Euro 2012. The latter is connected with the chaos surrounding the project for two sections of the A2 motorway, from which the Chinese contractors have been removed. According to media reports, there is no shortage of companies interested in taking over the project, with potential contractors including large stock exchange listed companies, such as Budimex and PMS. The former company, after a few very good months, has ended up being marked down by investors by over 13 pct. Shares in Mostostal Export also underwent a double-digit change, but this time in an upward direction. Its 40 pct share price growth is quite impressive for a company that remained in the red over the reported period. Analysts and journalists connected this unusual increase with the possibility of a new investor taking a stake in the company, but the head of Mostostal Export himself openly admitted on the pages of ?Puls Biznesu' that he was not aware of this or any other reason for the rise in Mostostal's share price. There was no shortage of surprises in the development sector - the sale of GTC's stake in Galeria Mokotów for PLN 0.5 bln could be considered one of them. Analysts were slightly taken aback by this, as the well-known Warsaw shopping centre was ?the pearl in the company's crown', but they pointed out that the company needs cash for financing similarly ambitious projects (including a shopping centre in Wilanów district being developed in cooperation with Polnord). Meanwhile Orco, which has been seriously scarred by the crisis, has announced that it is turning the situation around and returning to its roots in development. The company is to focus on the capital cities of Germany, Poland and the Czech Republic, and as a consequence is selling properties in Russia and Germany. Also Warimpex, which registered a growth of income from its hotel operations of nearly 15 pct in Q1, has announced new projects in Poland and the Czech Republic. (Mir)

Better mood in Budapest
As in Warsaw, the mood on the Budapest trading floor at the end of May and in the main part of June was better than on the Western stock exchanges. As a result the BUX index gained over 1 pct, ?even though the growth was put on hold in mid-June due to the commotion in Greece; however, the indexes did manage to stay healthy. The mood in Hungary improved slightly because the local economic growth of 2.5 pct in Q1 was the fastest in five years. Meanwhile, the Prague Stock Exchange followed its western ?counterparts and lost 2.8 pct over the month.