Multiple factors push market down
The Warsaw Stock Exchange (WSE) recorded nearly record lows last week for more reasons than just shocking inflation figures, analysts said.
Tele-giant Telekomunikacja Polska (TPSA), for example, was down another 9.15% to zl. 25.80 per share. That adds up to a 30% loss since announcing it had sold a 35% stake to France Telecom a month ago.
An expected employee share sell-off in November after a two-year lock-up period ends has continued to push down the stock on fears the shares will flood the market, analysts said. In addition, Stephen Pettyfer, an analyst with Merrill Lynch in London, said telecom appetites have been low throughout Europe while record-netting Universal Mobile Telecommunications Systems (UMTS) auctions continue in Germany.
The proximity of similar UMTS auctions to take place in Poland, probably in September, makes it even worse for companies like TPSA, Pettyfer said.
TPSA isn't required to purchase its reserved license to provide fast internet access on mobile phones, but it probably will and at a market price, said Marcin Sadlej, head of economic research at CDM Pekao Securities.
The WSE's all-share WIG index was also down, but considering July's 11.6% inflation figures, "the stock exchange did not react as dramatically as it might have," Sadlej said. The WIG fell 2.56% to 18,276.3 points and saw volume dive 43.48% to zl. 375.41 million ($87 million) in trades.
Virtually the only market activity came from international traders and those dealing in global depository receipts (GDR), analysts said. As for Polish players, "they are generally out of the business right now," Sadlej said. "They're definitely not trading too much."
Almost across the board, companies offering London-traded global depository receipts (GDR) suffered the most, analysts said. Expectations that the Monetary Policy Council (RPP) will likely raise interest rates by 100 to 200 basis points at month's end are also keeping local investors away from the markets, they said.
Banking-sector stocks are a good example of those often traded in GDRs.
Bank Ochrony Srodowiska (BOS) dropped 10% on the week to zl. 75. The zl. 85 share price, seen on Aug. 11 when Sweden's largest bank Skandinaviska Enskilda Banken (SEB) announced it wanted to buy a 33% stake in BOS bank, didn't last long.
BOS is a niche bank that specializes in financing environmental-protection ventures, and "SEB wanted to buy anything in Poland for a long time," said Artur Szeski, an analyst with CDM Pekao Securities. Wood & Co.'s Andrzej Powierza added that SEB would have to buy something in Poland to round out its holdings in the Baltic region. "And in Poland, there's nothing left to buy," he said.
BOS is 44% owned by the National Environmental Protection Fund (NFOS). The fund specializes in granting subsidies and loans to support initiatives that protect the environment. SEB wants to buy a 19% stake in BOS from Kredyt Bank and 7.71% from Rolmex.
Szeski said that NFOS and SEB most likely reached an agreement that would leave SEB responsible for developing retail and corporate banking within BOS. Under the probable agreement, NFOS would support ecological banking. "And this is a good solution," Szeski added.
BOS has traded on the WSE since 1996 and has one of the lowest liquidity levels among banking-sector stocks, but, according to Powierza, neither NFOS nor SEB have plans to increase it. In addition, SEB's acquisition will end the conflict between the two main shareholders the fund and Kredyt Bank.
