NY, not UW, prods bear market
Despite the worst political crisis in the governing coalition's 29-month history, last week's losses on the Warsaw Stock Exchange (WSE) were mainly triggered by falls on New York's Dow Jones and Nasdaq indexes, analysts said.
The all-share WIG index dropped 7.09% on the week to close Friday at 18,356.7 points. Volume fell 1.53% to zl. 894.5 million ($203.3 million).
"The influence of international markets was much greater than the political front," said Pawel Zach, an analyst at Citibank (Poland), referring to the Nasdaq's 6% drop last Wednesday. While the Freedom Union's (UW) threat to leave the national coalition caused a volatile zloty, "we had no panic on the markets." The zloty traded last Monday at 4.45-4.60 against the dollar and finished the week at 4.51.
With the crisis expected to intensify this week, Zach said the equity market will suffer if the coalition collapses or enjoy a minor surge if UW stays in the government, but that both reactions will be short term. However, there is "greater downside potential than upside," he added.
Following Nasdaq's losses, the WSE's blue-chip tech stocks took the brunt of the pounding, among them Optimus, which fell 18.37% to finish the week at zl. 160 per share. Softbank and Prokom also plummeted, falling 17.7% and 15.2% to zl. 160 and zl. 167 respectively.
But not all investors were busy pulling out. Tire firm Stomil Olsztyn fell 2.9% to zl. 22.8 after its French majority shareholder Michelin acquired another 4.2%, upping its stake to 58.1%. It also announced Stomil's name will change to Michelin Polska. Pawel Puchalski, an analyst at Raiffeisen Capital & Investment Polska said the move indicates Stomil's imminent exit from the WSE.
"It's almost obvious that the name change is the first step to delisting the company," he said, adding that Michelin will soon make a public call for the remainder of Stomil stock. "Afterward there will be no sense in keeping Stomil on the WSE: the free float will diminish, the price will be stable and the turnover will be around zero."
He added that none of Michelin's subsidiaries in other countries feature on stock exchanges, and a delisting will benefit the French company because it will no longer have to publicly declare its strategy for Stomil. With global competitor Goodyear present as a 59.9% shareholder in Debica, also on the WSE, Michelin is eager to avoid publishing such things, Puchalski said.
Furthermore, Stomil's delisting inevitably means Debica's eventual removal from public markets because Goodyear will not want to disclose its plans when its competitor is not obliged to. "Sooner or later we may expect exactly the same situation with Debica," he said.
In other news, the Treasury Ministry revealed its plans to sell a 10% stake worth around zl. 616 million ($140 million) in copper and telecom giant KGHM Polska Miedz. The sale will occur by the end of the year via a public offering predominantly aimed at Polish pension funds. However, despite the increasing prominence of domestic institutional investors on the WSE, the ministry said that the funds might not be able to buy the whole stake and that it will consider increasing the number of global depository receipts (GDRs) in the offer.
Analysts said that the preference for Polish funds is mainly political, so that the government is not seen as giving away state assets to foreigners. And while many foreign companies manage Polish funds, "there is no possibility they can sell their shares and get out of the market, the money belongs to Poles," Puchalski said.
