Blue chips tumble as trader gloom continues
The Warsaw Stock Exchange (WSE)'s (http://www.wse.com.pl) blue chip stock index bottomed out to a two-year low last week before investors bought into a select few tech and telecom stocks and stimulated a late correction, although analysts are not optimistic about a sustained recovery through the next month.
"We can observe at one moment a big recovery," said Piotr Dudzinski, a broker with Dom Maklerski Banku Handlowego. "It looks impressive but we've been looking at a very bearish market for the last 30 days. Generally the trend is bearish."
For the week ending Thursday, the blue chip WIG20 index stayed fairly flat at 1,298.39, the all-share WIG dropped 0.6% to 14,186.16 and the TechWIG wiggled up less than 1% to 798.54. Volume was light at zl. 1.02 billion ($255 million).
Poland's weak macroeconomic signals, mounting budget problems and high interest rates, plus slowing economies abroad have stifled the WSE recently, brokers said.
Last week, government officials announced they would revise 2001's spending plan because revenues have not kept pace with expenses. Suggestions to increase the budget deficit, and loosen fiscal policy, coupled with higher-than-expected inflation figures for May make it less likely that Poland's Monetary Policy Council (RPP) will lower interest rates when it meets this week.
RPP officials will also consider producer price index (PPI) figures released last week that were lower than expected and indicative of weak domestic demand, economist said. But that is probably not enough to sway the RPP to drop rates.
"There is recent disappointment in the Polish scenario," said Piotr Kazimierski, co-head of equity sales at SG Securities. "The reason for such a poor perception in Poland is that foreigners are disappointed with what's happening and chances for an interest rate cut are more and more distant, especially with the CPI (consumer price index) higher. Ahead of (September's) elections, I don't think anybody is expecting a healthy recovery."
Despite the gloomy projections, blue chip tech stocks Thursday helped lift the Warsaw bourse off two-year lows. Polish stocks gained some momentum from a mild rally on U.S. markets; the Nasdaq was up for the third day in a row Thursday. News that France-based Vivendi Universal would submit a new offer of cooperation with power and telecom group Elektrim also rallied buyers.
Elektrim's management is considering competing offers from Vivendi and Deutsche Telekom for control of Polska Telefonia Cyfrowa (PTC), the country's largest mobile phone operator. Elektrim's stock was especially strong Thursday but for the week rose only 0.8% to zl. 25.70 per share.
Despite the late-week swell, traders remained pessimistic.
"I don't see it as a recovery, just a correction," Kazimierski said.
While traders watched the individual stocks being bought and sold, the government last week set out a proposal to sell the WSE itself. The privatization plan, approved by the government's economic committee (KERM), would see the Treasury Ministry selling most of its interest in the WSE by 2005, a government statement said. A strategic investor would take up to 40% of the exchange, brokerages and financial institutions would control 30%, the treasury would keep little more than 25% and employees would hold about 5%.
The government said the plan would ensure the WSE's position in Central and Eastern Europe and enter the WSE into a strategic alliance. Euronext, the merged Paris, Amsterdam and Brussels stock exchanges, was mentioned as a possible partner.
