Bargain hunters help raise spirits on WSE
The Warsaw Stock Exchanges (WSE) blue chip stocks hit new long-term lows last week, though the apparent gelling of a new government coalition, bargain hunting and a hoped-for push from institutional investors helped prop up the market at weeks end, according to analysts.
The most important aspect is the reality of the new government, who will be in charge of reforms and how credible the reform package will be, including the budget, said Michał Szymański, investment manager at ING BSK Asset Management. The credibility of the budget is key.
The WSEs blue chip WIG20 index slipped 0.3% to 1,010.37 points, the all-market WIG index fell 0.6% to 11,721.99 and the TechWIG dropped 2.6% to 507.62 for the five-day period ending Thursday. Volume was a light zł. 736 million ($175 million), up slightly from last week.
The WIG20 closed below 1,000 for the second time in two weeks Oct. 3. The index dipped below 1,000 for one day in October 1998 but has not stayed below that mark for any length of time since January 1996. The market crawled above the psychological mark Thursday and barely stayed there for Fridays close.
The WSEs upward push lagged behind world markets, which started to climb Monday and followed with three days of steady growth. The tech-heavy Nasdaq Composite Index was up 9.4% while the pan-European blue chip FTSE 300 grew 2% for the week ending Thursday.
First there were the attacks in the United States and a nervous downturn all over the world, followed by a rebound, Szymański said. In Poland to some extent this rebound was postponed a bit because of disappointment with election results. The market expected a majority victory for the main party and quick formation of the government.
That hasnt happened so the reaction was a bit cold. But as time passes and we are closer and closer to formation, there is a better attitude.
In the Sept. 23 parliamentary elections, the Democratic Left Alliance (SLD) was the biggest winner but fell short of the outright majority needed to form a government. Party leaders are expected to cobble together a government and have it approved by the Sejm during its next sitting, which begins Oct. 19. Meanwhile, equity markets have begun to accept that the party will have a sound fiscal policy, Szymański said.
The market is also propped up by bargain hunters, with the WIG20s 1,000 level a strong support line for stocks, said Piotr Dudziński, a broker with Dom Maklerski Banku Handlowego.
And stocks that slipped for the week appear to have found their bottom when they fall below a certain level they are snapped up and the price rises. The biggest and heaviest traded stock on the WSE, Telekomunikacja Polska (TPSA), has strong support around zł. 11 and copper and telecoms group KGHM Polska Mied around zł. 10.
KGHM and TPSA seem to be relatively strong because they seem to be at the end of their downward tendency, Dudziński said. There is a huge demand just below this level. Its very difficult to buy the stock below these prices, so they are relatively strong.
TPSAs share price ended the week down 2.2% to zł. 11.15 and KGHM was off 2.4% to zł. 10.35.
Other stocks have a less certain future. Media group Agora, publisher of daily newspaper Gazeta Wyborcza, had a string of tough days last week as brokerages around Europe downgraded ratings for similar companies on the assumption that marketing and advertising budgets are some of the first to be cut when the economy slows. Agora reported a consolidated net profit of zł. 159 million ($37.8 million) on zł. 406.5 million ($96.7 million) in sales for the first half of the year, but analysts said the third and fourth quarters could see the numbers tumble.
This seems to be a sudden impression from abroad, Dudziński said. The sector is under pressure at the moment. People expect the third quarter will be worse than the second.
In the anti-media sell-off, the companys stock fell 3.8% Oct. 2 and 4.2% Oct. 3. Shares ended down 4.6% to close at zł. 41.40 for the five-day span ending Thursday.
Other factors on the market were the slight recovery on European bourses and Nasdaq, as well as expectations that more money could flow into the market, Dudziński said.
