Market falls on Nasdaq losses
The market suffered heavy losses for the first time in months despite hitting a new all-time high of 22,868.4 points last Monday. The losses followed a week-long decline on the Nasdaq index in the United States, analysts said.
The all-share WIG index dropped 5.06% on the week to settle at 21,255.9 points by the close of trading Friday. Volume fell 8.1% to zl. 1.27 billion ($309.8 million) as domestic inflows left the Warsaw Stock Exchange (WSE).
"We can only hope it ends on Monday but everything depends on Nasdaq," said Pawel Puchalski, an analyst at BRE Brokers. He said if the downward trend continues, the WIG could fall to 19,500 points by the end of this week.
However, the market has climbed almost continuously since last October, and the losses are nothing unusual, Puchalski said. "This is simply a correction."
Analysts said it wasn't only the tech and telecom sectors that dragged the index down; other blue chips were also responsible for the market's deep decline. Consequently, recent market drivers plummeted, with IT firms Optimus and Prokom showing huge falls, decreasing 19.23% and 16.54% to close on zl. 252 and zl. 227 per share respectively. Puchalski said that in contrast to previous weeks, when IT firms fell sharply, the price decreases were simply due to the pullout from Nasdaq and to profit taking.
But other blue chips, such as Elektrim and media firm Agora, saw deep declines. Agora fell 15.19% to close at zl. 114.5 while Elektrim dropped 11.8% to finish at zl. 60. While both firms are involved in internet projects, these are not their core business.
On the main market, a few banking and construction stocks escaped the overall downward trend. On the banking side, BIG Bank Gdanski (BIG BG), the subject of a takeover battle that Deutsche Bank looks set to win, rose 7.5% to close at zl. 12.9. Currently Deutsche is in talks with BIG BG's management and other shareholders Banco Comercial Portugues (BCP) and Eureko. A decision should be through April 21 over the bank's future shareholder structure.
But the week's biggest story came with the news that Spanish builder Ferrovial was in negotiations to buy a stake in construction company Budimex, which gained 17.2% to close at zl. 38.2. Earlier in the week it hit a record high of zl. 40.4. The news followed similar developments last month when Swedish giant Skanska bought a 10% stake in Budimex's main rival Exbud and applied to exceed 50% in the firm.
Budimex's main shareholders are Kredyt Bank, Austria's Baupost Group and Templeton Direct Advisors, with 9.72%, 8.03% and 7.58% stakes. The remainder of the company is publicly traded but the company is heavily represented on the portfolios of major investment funds, said Rafal Jankowski, an analyst at CDM Pekao Securities.
Late last week Ferrovial declared it intends to be a strategic investor rather than a majority shareholder. Jankowski said it intends to buy 35% of Budimex, but that it is tactically trying to play down its intentions to keep the stock's price lower so it spends less. "The market is very hot and (Ferrovial) doesn't want to pay too much," Jankowski said.
He added that Ferrovial will eventually try to gain overall control of Budimex. "It's not possible to manage a company like Budimex and consolidate it fully without 51% of votes." Jankowski said Budimex is undervalued and expects the company will sell some of its non-construction related assets to build on its core business and acquire smaller firms in the sector. He said Budimex could be worth as much as zl. 45-zl. 50 per share.
