Polish stocks are the most expensive after increases in domestic interest rates

After the previous increase in Polish interest rates, domestic stocks rose the most of all the countries where rates were raised for the first time. It is no different today when the WIG20 increased by over 2 percent after yesterday's hike. This shows that Polish stocks are not afraid of raises and even expect them. This is a paradox because usually such increases are considered bad for the stock market.

"It is obvious to every investor that increases in official interest rates are not beneficial for the capital market. Higher interest rates on bank deposits – as a result of such increases – cause some money to flow out of stocks there. Higher interest rates also reduce corporate profits and negatively affect stock prices, with the exception of banks and companies in the financial sector, whose profits grow along with higher rates,"  Paweł Majtkowski, an eToro analyst, assessed.

In his opinion, the interest rate hike, however, surprised the markets as it had not been previously signaled.

"On the other hand, inflation currently amounting to 6.8 percent y/y is seen by the market as a serious threat to maintaining long-term healthy growth. Therefore, due to concerns about the risk of inflation escaping out of control, the market reacted positively to the hike," the expert said.

(WBJ)