Oil, bank stocks spur record volume
The market finally broke through the 16,000 barrier last week for the first time since mid-September on the back of increased investor confidence and general enthusiasm for the upcoming listing of oil giant Polski Koncern Naftowy (PKN).
The all-share WIG index climbed 4.05% on the week to close at 16,055.40 on Friday. Volume hit a six-month high of zl. 1.09 billion ($279.23 million), climbing 68.9%.
"The increase was mostly due to the PKN debut," said Marek Juras, an analyst at Erste Securities Polska.
In addition, similar to the previous week, both domestic and foreign investors traded heavily due to the improved macro situation after the Monetary Policy Council's (RPP) drastic 2.5-3.5% interest rate hikes on key rates. Furthermore, fears of Deputy Prime Minister and Finance Minister Leszek Balcerowicz resigning, which he had threatened to do over the tax bill, appeared to subside.
"Political issues are not a threat; there's no bad news for macroeconomics," said Michal Mierzwa, an analyst at Centrum Operacji Kapitalowych Banku Handlowego. "Many investors are very optimistic."
The most important event on the market this week was PKN's initial public offering (IPO). The company, when it lists next week, will be the second largest stock on the Warsaw Stock Exchange (WSE), second only to Telekomunikacja Polska (TPSA). In off-market trading, PKN hovered around the zl. 22 mark for most of the week, up 12.8% from its issue price and far higher than had been expected. The company's Global Depository Receipts (GDRs) were trading at zl. 20 last Thursday and Friday, said Pawel Zach, an analyst at Citibank (Poland).
The stock was "substantially oversubscribed," Zach said, up to 14 times in the domestic retail tranche, according to some reports. Due to this, many investors got their money back and had reinvested it in other parts of the market, driving the WIG further, he said. Most demand came from small retail investors and Polish institutions, Juras said. In terms of PKN's share allocation, pension funds received around 80% of the shares they subscribed for at the expense of banks and asset management companies, which received a much smaller percentage.
Other climbers last week included Elektrim, which continued to pick up after its all-time low of zl. 25.9 three weeks ago, rising a modest 1.22% on week to close at zl. 33.3 on Friday.
More dramatic were bank stocks, Bank Pekao and Powszechny Bank Kredytowy (PBK). Pekao rose 7.5% and PBK was up 11.43% on the week, closing at zl. 47.3 and zl. 84.8, respectively. PBK benefited from long-term demand for banking stocks, and is the most undervalued of them all, Juras said. "At the moment, if any money goes to Polish banks, it is usually allocated to PBK," he said.
However, Bank Pekao's performance came on the back of a slew of "buy" recommendations from over 10 London brokerage houses on the basis that the firm's long-term plans to transform into the country's leading financial institution are achievable, Juras said. No other Warsaw-based investment bank carries the same recommendation, he said.
Merrill Lynch downgraded its intermediate view on Bank Slaski to "neutral" from "accumulate," on the basis of an uncertain near-term earnings outlook after weak third-quarter results, the investment bank said in a report released last week and dated Nov. 20. "We are lowering our intermediate-term recommendation to 'neutral,' with a more conservative valuation of zl. 219," Merrill Lynch said. However, shares in Bank Slaski closed up 3.53% on the
week, at zl. 249 on Friday.
