Profit taking ends string of all-time highs
The market dipped last week on a profit-taking spree after February's spate of all-time highs, alongside decreasing inflows resulting from the poor macroeconomic climate and fears of a U.S. interest rate hike. The all-share WIG index fell 4.37% on the week to finish at 21,833.8 points. Volume dropped 8.9% to zl. 1.73 billion ($421 million).
"Profit taking can be observed on the market; that's investors' sentiment at the moment," said Rafal Gebicki, an analyst at Raiffeisen Capital & Investment Polska. Gebicki added that last week's announcement that the current-account deficit reached $1.2 billion stymied further inflows. Moreover, the market remained cautious due to expectations that the U.S. Federal Reserve is planning to raise interest rates a further 50 basis points, he said.
As a result, two tech stocks partly responsible for the Warsaw Stock Exchange's (WSE) recent 100% rise since the beginning of the year saw their share prices tumble last week. Softbank plummeted 18.34% to close at zl. 285 per share, and Prokom fell 19.3% to finish at zl. 259. ComputerLand also dropped 11.11% to finish the week at zl. 100.
However, not all IT stocks saw the same pattern. Optimus rose 8.03% to finish at zl. 316, while media firm Agora, whose share price has enjoyed increases this year on the back of planned internet projects, climbed 10% to close at zl. 159.5. Last week Merrill Lynch upgraded Agora to a "buy" recommendation from "neutral," giving the stock a 12-month target price of zl. 205. Optimus met with investors last week and predicted it will post better results in 2000 after last year's net profit plunged 90.4% to zl. 2.5 million ($641,026). However, "we have heard for the last five years that the next one will be better," said Michal Mierzwa, an analyst at COK Banku Handlowego.
But analysts said investors are gradually shifting their focus from the IT and telecom boom. "Traders have realized that the internet is a little bit overvalued and are looking for sectors that haven't risen so rapidly in recent months," said Pawel Zach, an analyst at Citibank (Poland). "You can't squeeze much more from (the IT) companies."
Consequently, construction stocks saw price inclines last week, with Exbud rising 3.8% to finish at zl. 41, while Mostostal Export climbed 4.74% to close at zl. 4.62. Blue-chip construction stock Budimex also saw its price increase, rising 5.54% to finish at zl. 30.5. Despite the fact that Exbud saw its 1999 net profit hit zl. 32 million ($8.2 million) last year, 36% lower than the firm had predicted, investors remain buoyant on its prospects for this year, analysts said.
Elektrim was also in the news, falling foul to profit taking and dropping 12.75% to close at zl. 60.2. However, the company announced last Thursday that it had decided to exercise its call option on issuing convertible bonds. Elektrim said it hoped investors would convert these bonds into shares given the stock's recent strong performance. By doing so, the firm hopes to raise around zl. 255.3 million ($62.27 million), which it will channel into reducing its debts.
In brewing news, market leader Zywiec announced its net profit reached zl. 82.6 million ($21.18 million) last year against 1998's zl. 1.2 billion ($342.9 million) net loss. The company will also invest zl. 390 million ($95.1 million) into restructuring its marketing and distribution over the next two years. Analysts said that the move is very welcome given the brewery's main competitor South African Breweries' (SAB) aggressive strategy and the declining fortunes of Okocim.
"Zywiec needs to do something fast and it's a good time to prepare for the future," Mierzwa said. Zywiec closed at zl. 355, falling 1.39%.
