Market eases on news of rate cut
The market dipped at the end of last week after a bullish start on Wednesday's 0.5% interest rate hike in the United States, despite falling inflation and positive expected industrial output figures for April, analysts said.
The all-share WIG index slipped 0.12% on the week to close Friday at 19,758.3 points. But volume rose 9.17% to zl. 908.5 million ($206.5 million).
"The disorientation caused the market to move to the sidelines" after the U.S. Federal Reserve hiked interest rates 50 basis points, said Tomasz Mazurczak, head analyst at BRE Brokers. "The news suggests that the market is set for a flat tendency for the next couple of weeks and even months."
Although inflation came in at 9.6% last month against 10.3% in March, and April's industrial output figures were predicted up 7.2% year on year compared to the previous month's 6.8%, "it seems we're more vulnerable to the situation on international exchanges," said Marcin Sadlej, an analyst at CDM Pekao Securities. Despite predictions, industrial output came in at a 5.5% rise year on year.
Sadlej added that growing interest in debt securities has driven some of the liquidity from the equity market, causing prices to drop. Moreover, the current ruckus in the governing coalition over the status of Warsaw's government had caused further investor unease, and will continue to do so as the race for the presidential election approaches, Mazurczak said.
One of the most noticeable features on the Warsaw Stock Exchange (WSE) last week was the strong performance of Polish exporters, Mazurczak said. To this end, glass producer Irena rose 8.97% to zl. 7.9 per share. The firm exports around 80% of its output to the United States, Japan and the U.K., "countries of relatively strong currencies," he said.
In banking news, Citibank announced its public call to hold up to 66% of shares in Bank Handlowy for zl. 70 per share. Last Wednesday, PZU Zycie president Grzegorz Wieczerzak, the life insurance arm of Powszechny Zaklad Ubezpieczen (PZU), announced the firm will sell its 8% stake in Handlowy to the U.S. financial group. Currently Citibank holds a 9.9% stake in the Polish bank, and "we think the call will succeed," said Robert Sobieraj, an analyst at Centrum Operacji Kapitalowych Banku Handlowego. Handlowy rose 2.66% to close at zl. 65.7.
Construction firm Exbud was also the subject of a public call, by Swedish majority shareholder Skanska, at a price of zl. 40 per share. However the move was just a formality: right now Skanska holds around 75% of Exbud's share capital and was obliged by regulations to make the call because it had exceeded 50% in Poland's largest builder.
In other news, Deutsche Bank Research upgraded copper, silver and telecoms concern KGHM Polska Miedz from a "buy" recommendation to "strong buy." "Due to the zloty's devaluation and increased copper forecast, we project strong 2000-2001 earnings growth," Deutsche said in a report dated May 9. It added that KGHM is the only stock listed on the WSE that has benefited from the currency's recent falls since 90% of its costs are dominated in zloty while almost all of its parent sales are dollar-denominated.
After selling stakes in four subsidiaries in the first quarter of 2000, Deutsche expects the parent group to account for 96% of sales this year compared to 92% last year. It also foresees an increase in KGHM's 19.63% stake in mobile phone operator Polkomtel (Plus GSM). "We expect the company to increase the holding to over 20% this year and to start to consolidate Polkomtel," Deutsche said, giving KGHM a 12-month target price of zl. 43.3. Last week the stock rose 1.58% to zl. 32.2.
