Bad TPSA, Elektrim news chills WSE
The Warsaw Stock Exchange (WSE) slumped last week after two to three weeks of modest gains, with the all-share WIG index down 3.52% to 14,473.3. Weekly volume rose 5.4% to zl. 401.29 million ($100.3 million).
"There was an unhappy confluence of events within the Polish market," said Gordon Muir-Carby, head of European emerging markets with HSBC.
The entire market shook after Elektrim on Thursday announced it had racked up a zl. 209.4 million ($52.35 million) loss in the first nine months of 1999. Much of that loss was caused by the company's heavy investment in the telecom sector, rising debt servicing costs and foreign exchange losses.
That loss caused several investment banks to review their recommendations on the stock and prompted one, ABN Amro, to slash its recommendation from a "buy" to a "sell urgently."
Elektrim closed the week at zl. 30.20, down 3.3%.
"It accelerated the (existing) bad mood," said Rafal Lorek, a salesman with SG Bank.
Elektrim wasn't the only stock to suffer bad news. Telekomunikacja Polska (TPSA) found out that SBC Communications decided to pull out of its privatization, leaving France Telecom as the lone bidder.
TPSA shares were little affected by the announcement, however. TPSA closed on Friday at zl. 20.90, down 2.3% for the week.
"I think that TPSA was just following the market," Lorek said. He noted that the announcement of SBC's departure came late in the week, after several days of rumors. "I think it was already in the price."
Deputy Prime Minister and Finance Minister Leszek Balcerowicz's threat to resign last Thursday unless Parliament accepted his tax reform also affected the market. The zloty weakened to more than 4.86% below parity.
"The slippage of the currency is not helping the situation," HSBC's Muir-Carby said.
That will hurt many companies that have their debt denominated in hard currency. That exposure is part of what hit Elektrim, but Muir-Carby said the effect on other stocks was not as severe.
"Quite a lot of companies are exposed to foreign debt and their reaction was not as dramatic," said Benita Mikolajewicz, an equities analyst with ING Barings.
But Mikolajewicz also noted that, "A strong dollar over a weak zloty is not very bad for all companies."
A case in point was KGHM Polska Miedz, which saw its share price close at zl. 24.10 last Friday, up 2.1% for the week.
One other stock that did well in the past week was Bank Pekao. "It was quite strong this week in comparison to the market," Lorek said.
The share posted a gain of 6% for the week to close Friday at zl. 42.4.
Other news that could influence the market in coming weeks is a U.S. Federal Reserve decision on interest rates slated for the end of November. Many analysts said those rates were not likely to be raised, which should positively affect the WSE as it generally moves in tandem with U.S. markets.
"Of course good information from the U.S. is always good for the market in general," Mikolajewicz said.
That positive news, however, could be dulled by the possibility of a rate hike in Poland. The National Bank of Poland's (NBP) Monetary Policy Council (RPP) is scheduled to discuss rates at its meeting No. 17.
"There is serious risk here in Poland that in the midst of November the interest rates could be increased," Mikolajewicz said.
