Rate cuts fail to rally WSE
By : Jeffrey Sparshott
The Warsaw Stock Exchange (WSE) last week ignored an interest rate cut and heeded weak economic signals as it reversed gains from two weeks ago and resumed the year's downward trend.
"I think that in general the causes are the same as in previous weeks the uncertainty of the macroeconomic and political situations," said Wood & Co. Broker Bogumila Cebelinska, who was ticking off a widening budget gap, a strong currency that makes investors wary, interest rates that are still high and a poor worldwide outlook as reasons for investor malaise. "And if you look into specific stocks, there is no good news. Everybody is worried that second-quarter results will be worse than the first quarter."
The all-share WIG index was off 1.3% to 14,007.73, the blue chip WIG20 slipped 1.6% to 1,277.89 and the TechWIG dropped 2.4% to 779.51. Volume was very low at zl. 875,081 ($218,770) for the week ending Thursday.
Until Tuesday last week the WSE's main index had gained ground for three consecutive days coming off two-year lows two weeks ago but the overall trend has been negative for more than one month. On the year, Poland's bourse has lost almost 22% of its value while blue chip stocks have dropped nearly 30%.
A 150 basis point interest rate cut announced mid-week by the Monetary Policy Council (RPP) was not enough to alter the trend, as investors saw the move as too little, too late.
On the corporate front, investors scrutinized stocks such as copper and telecom concern KGHM Polska Miedz, pharmaceuticals firm Przedsiebiorstwo Farmaceutyczne Jelfa and Telekomunikacja Polska (TPSA) as the government, a major shareholder in the yet-to-be fully privatized firms, pressured for higher stock dividends as a sop to budgetary troubles.
KGHM's shareholders decided to increase the dividend payout to zl. 1 per share from zl. 0.75 despite management's recommendation otherwise. The treasury, which controls 44% of the company's stock and a majority of its voting rights, will receive zl. 90 million ($22.5 million) as a result.
"It's shown that if a company has the treasury's influence it's rather negative for the company," said Radoslaw Czyrko, an analyst with Erste Securities Polska. "We saw that also in TPSA. If the budget and public finances are at a critical level, the treasury will try to take what is possible from the dividend payout."
This year, KGHM has also been hit by weak copper prices, a strong zloty that hurts exports, union troubles and a criminal probe into a former executive. Despite the bleak news this year, the treasury last week announced that in September it would release details for selling a 10% stake in the company.
KGHM's share price fell 5% to zl. 17 on the week.
With TPSA, shareholders decided not to pay any dividend from its 2000 net profit. The treasury has a 35% stake in TPSA and proposed a zl. 0.32 dividend per share. The company's share price ended the week up 1.14% to zl. 17.80.
Jelenia Gora-based Jelfa's shareholders last week decided to increase the dividend payment to zl. 1.10 per share from zl. 1, a 10% increase that totals zl. 7.48 million ($1.9 million), or 71% of Jelfa's net profit, according to an ING Barings report. Last year's dividend amounted to 96% of net profit. The treasury is the company's biggest shareholder, controlling a 35% stake.
Despite the large sums involved, analysts said the money would provide little relief for government coffers.
