Positive macro news lifts WSE
By : Justyna Wrobel
After weeks of volatility, the Warsaw Stock Exchange (WSE) showed signs of recovering last week as positive inflation data and surprisingly good industrial output figures boosted investor confidence.
The December industrial output index dropped by 2.2%, compared with the previous December. This was considerably better than the 6% figure predicted by analysts. Even more reason for optimism was year-on-year inflation, which came in at 8.5%. In addition to sparking activity on the WSE, the positive macroeconomic figures rekindled talks of possible interest rate cuts.
"Now there are good conditions to cut interest rates," said Pawel Borys of Erste Securities Polska. While Borys suggested that cuts of 100-150 basis points were likely, he didn't think that the Monetary Policy Council (RPP) would make any moves until food and oil prices for January and February were calculated.
Regardless of when the cuts are made, analysts agree that the construction sector will be among the beneficiaries of reduced interest rates.
"The expected cuts will influence the banking and construction sectors," said Pawel Puchalski of Raiffeisen Capital & Investment.
Budimex, Borys said, is the most promising construction firm listed on the WSE. In addition to recording strong financial results in the third quarter of last year, it has a healthy capitalization of about zl. 500 million ($122 million). As an investment pick, the construction sector gathered steam last week as U.K.-based insurer Commercial Union announced that it had acquired 6% of Mostostal Warszawa's share capital, and later, that it increased its stake in Budimex to 6%. Budimex' share price finished at zl. 20.7, up 7.3% from last Friday's close of zl. 19.30.
For the week, the all-share WIG index gained 3.0% to finish at 17,597.68 points. The volume of traded shares reached zl. 561 million ($136.8 million), a 45% increase over last Friday.
Bogna Sikorska, an analyst at CDM Pekao, said that the most popular stocks were liquid companies with high capitalization, such as Prokom, Bank Pekao and KGHM Polska Miedz.
KGHM finished the week at zl. 24.4 per share, up 5.2% on Thursday alone. Borys attributed the stock's rise to investors' realization that the recent low share price of the stock had been overstated.
Elektrim also surprised analysts last week when its vice president disclosed the conglomerate's plans for a potential share issue later this year. "The market reacted with a rapid drop in (Elektrim's) share price," Puchalski said. Elektrim, a WIG-20 company, caused the index to increase by only 0.3% last Thursday, analysts said.
According to Puchalski, an Elektrim share issue would initiate permanent change in the conglomerate. "I think that Elektrim's share price should grow, so at the moment its stock accumulation is recommended," he said.
Elektrim closed at zl. 47.5 last Friday, up 1.1% from the previous day.
