Production stocks make strong showing
Despite a profit-taking spree on IT stocks, the market inched forward last week on the back of domestic investment into "old economy" production and banking stocks, analysts said last week.
The all-share WIG index moved up 0.01% on the week, closing Friday at 22,387.9 points. But volume fell 21.6% to zl. 1.39 billion ($339.02 million).
"The market has started to look for new leaders," said Rafal Gebicki, an analyst at Raiffeisen Capital & Investment Polska. He said that while tech, telecom and media stocks still show huge potential in the long run, for the time being investors are focused on other large cap and medium-sized firms.
Consequently, last week's biggest losers included Agora, which fell 11.98% to finish on zl. 135 per share, and Optimus, which lost 10.6% to close on zl. 312. And Elektrim, which had hit a record high of zl. 77.5 the previous week, shot down 12.26% to zl. 68.
However, production stocks showed significant gains. To this end, meat producers Farmfood and Sokolow increased 9.4% and 12.9% to close on zl. 14.5 and zl. 3.5 respectively. In addition steel producer Stalprodukt rose 12.5% to finish on zl. 9, while iron mill Ferrum made a 10% gain to close on zl. 17.6.
"The constant rise of the MIDWIG index proves that investors believe other companies will bring profits, not just IT firms," said Pawel Puchalski, an analyst at BRE Brokers. The MIDWIG index, on which many production firms are listed, comprises the next 40 stocks after the Warsaw Stock Exchange's (WSE) blue chip WIG 20 index.
Puchalski said that one of the most promising MIDWIG stocks is paper firm Swiecie. The company showed impressive fourth quarter returns last year, and has been very well managed since it went through internal restructuring and found a strategic partner in Germany's Framondi, analysts said. Furthermore, Polish paper consumption has risen markedly recently, allowing the company to increase its market share. "This has been noticed by the market and rewarded by it," Gebicki said.
Swiecie shot up 17.1% last week to close on zl. 22.6. "What stands behind the gain is the expectation of high dividends this year," said Pawel Zach, an analyst at Citibank (Poland). He said the firm plans to spend zl. 50 million ($12.2 million) on dividends in 2000 and yields amount to around 6%.
In banking news, BRE Bank gained 6.9% to finish on zl. 155, while Bank Pekao climbed 9.96% to zl. 58.5. Gebicki said BRE's rise followed speculation that its German shareholder Commerzbank is planning to sell its 49% stake to Citibank. And Pekao's gain came alongside rumors that its Italian strategic partner UniCredito is planning to divest its 51% stake in the bank and is looking for a new investment, he said.
Wielkopolski Bank Kredytowy (WBK) and Bank Przemyslowo-Handlowy (BPH) have both received "buy" recommendations from Erste Securities in its March report on the Polish banking sector.
WBK is "one of the best-managed universal banks" in Poland, with "a well-defined strategy and an outstanding competitive position in its core market of western Poland," Erste said. It expects WBK's shareholder, Allied Irish Bank, to merge it with Bank Zachodni in 3-4 years, creating a 6-7% share of the Polish banking market. Erste upgraded WBK's target price to zl. 34. It rose 3.7% last week, closing on zl. 28.1.
Erste upgraded BPH's target price to zl. 255 on the back of strong earnings this year and a strong strategy. "We expect a real improvement in BPH's financial performance in coming years," Erste said. "The current market price represents an excellent buying opportunity." BPH rose 1.54% to close on zl. 198.
