Market takes a brief breather, but optimism starting to grow
The Warsaw Stock Exchange (WSE) dropped slightly last week, but held steady above the 17,000 mark with investors optimistic after encouraging macroeconomic news on industrial output and next year's inflation and economic growth.
The all-share WIG index eased 0.05% on the week, closing at 17,061 on Friday, while volume fell 2.24% but remained substantial at zl. 939.99 million ($223.81 million).
"Analysts had been afraid but now everyone sees that the Polish economy is getting better," said Michal Mierzwa, an analyst at Centrum Operacji Kapitalowych Banku Handlowego. The evidence came with last Thursday's news that November industrial output rose 15.9% year on year, he said. But the view that the Monetary Policy Council's (RPP) estimates that 6% growth in gross domestic product (GDP) and the 5.4-6.8% inflationary target set for next year are realistic targets, also fueled enthusiasm on the market, Mierzwa said.
However, the stocks that saw the greatest gains were spurred on by other factors too, analysts said. One of the week's biggest gainers was media firm Agora, fueled by its intention to be involved in the internet market and a "buy" recommendation from Merrill Lynch, Mierzwa said. The stock climbed 17.08% on the week to close at zl. 56.90 per share, already just below the zl. 60 target price Merrill had issued on Agora.
Another gainer was steel pipe producer Ferrum, which soared 57.31% on the week to zl. 19.9 per share. The stock rose on the back of two hostile shareholders buying up large amounts of stock to increase their influence on the company, and as a result, minor investors took profits, said Pawel Puchalski, an analyst at Dom Inwestycyjny BRE Banku. "You could have been very rich in five days from this," he said.
The week also saw ratings agency Fitch IBCA upgrade Pekao's short- and long-term ratings to "F2" and "BBB+" from "F3" and "BBB" respectively. "The rating change reflects Fitch IBCA's view that Pekao's strategic investor, Unicredito Italiano, is strongly committed to the bank," Fitch said in a press release dated Dec. 15. Pekao rose 0.39%, closing at zl. 51.7 on Friday.
Also in the news was Wroclaw-based computer distributor ST Group, which debuted on the WSE's parallel market last week with a 29.4% first day gain.
Shares in the company closed Wednesday, its first day of trading, at zl. 11.65, from an initial public offering (IPO) price of zl. 9 per share, giving the company a market valuation of zl. 105 million ($25 million). The shares finished the week at zl. 12.
Wednesday's closing price gave ST Group a price-to-book value ratio of 3.36 and a price-to-earnings (p/e) ratio of 21.1. That compares to an average price-to-book value of 3.68 in the IT sector and an average sector p/e of 29.1. The company, founded in 1993 but with roots going back to an earlier incarnation in Berlin in 1985, raised zl. 13 million ($3.1 million) in the offering. Half of the company's shares are traded on the parallel market, said Wojciech Urbanski, a board representative. The offering's proceeds will be used to develop its distribution network and to begin buying up other competing firms, according to the issue's prospectus.
ST Group projects to finish its financial year with earnings of zl. 7.4 million ($1.7 million) on zl. 295 million ($70.2 million) in sales. Last year the company reported profit of zl. 4.7 million ($1.3 million) on sales of zl. 205 million ($58.6 million).
