Market cautious on new gov't
The market notched down last week after the governing coalition's collapse and the formation of a Solidarity Election Action (AWS) minority administration while investors tried to gauge the new government's direction, analysts said.
The all-share WIG index fell 0.88% on the week, closing Friday at 19,676.1 points. Volume fell 0.32% to zl. 971.36 million ($220.8 million).
"Investors were looking for hints to where AWS is going to go, whether it will be more populist or more economically liberal," said Michal Szymanski, investment manager at ING BSK Asset Management. "What the market doesn't want to see is an expansionary fiscal policy."
The zloty, which had looked shaky at the beginning of the week, strengthened with the euro's appreciation over the next few days, closing Friday at 4.42 against the dollar, said Krzysztof Urban, an analyst at Wood & Co.
While investors reacted positively to the appointment of Jaroslaw Bauc as finance minister, they were concerned with the negative impact that relaxed purse strings could have on the current account (C/A), analysts said. In addition, any foot-dragging in upcoming privatizations could hamper efforts to finance the C/A, which last April showed a deficit of 8.2% of gross domestic product (GDP), Szymanski said.
One threatened privatization is that of Powszechny Zaklad Ubezpieczen (PZU), which controls 60% of the insurance market and is slated for its initial public offering (IPO) at the beginning of next year. In the interim the Treasury Ministry had hoped to sell a 20-25% stake in PZU to pan-European insurer Eureko, which already controls 30%. But the ministry indicated it would back off last week due to pressure from both left and right-wing political factions that oppose selling off a controlling stake in the country's largest insurer to a foreign company.
"The discussions are continuing, we trust they will have a positive outcome," said Lorrie Morgan, Eureko's spokeswoman. "But it's up to the Polish government to issue shares and we will make decisions on a unilateral basis."
Polski Koncern Naftowy (PKN) Orlen's second public offering will go ahead at the beginning of July, the treasury confirmed. Urban said that its subscription price is likely to be at 10% below current levels. PKN rose 2.83% last week to zl. 21.8 per share.
In banking news, BRE Bank made its first foreign acquisition by buying a 51.4% stake in Austria's largest factoring enterprise Intermarket Factoring Bank (IFB) for zl. 30 million ($6.82 million). BRE said that the purchase will diversify the bank's revenue sources. But the purchase is more significant for BRE as an initial move towards entering Central and East European markets than as something that will improve its top and bottom lines, analysts said. IFB has a 50% market share in the Austrian factoring markets and also operates in Poland, the Czech Republic and Hungary.
"As an acquisition it won't add anything important to BRE but it can be a first step to doing something more there," said Andrzej Powierza, an analyst also with Wood & Co. "It (could) also help Polish enterprises to operate on these markets."
In addition, Bank Austria Creditanstalt (BA CA) received permission from the Anti-Monopoly Office (UOKiK) and the Banking Supervisory Commission (KNB) to increase its stake in Powszechny Bank Kredytowy (PBK) by 10.3% to 53.8% in a widely anticipated move. BA CA intends to merge the Warsaw-based bank with its subsidiary BA CA Poland while retaining the PBK name, Powierza said. PBK finished the week at zl. 93.5, falling 1.58%.
