Skeptical investors keep market low
After following the U.S.' Nasdaq into the pits two weeks ago, the Warsaw Stock Exchange (WSE) last week proved it has a life of its own, analysts said.
When the Nasdaq index went back up, Warsaw's all-share WIG index stayed low. It plummeted 8.5% last Monday after the Nasdaq fell 9.67% on its biggest point loss ever of 355 points the previous Friday. When bargain hunters pushed the IT-heavy U.S. exchange into its biggest ever single-day gain on Monday, the WIG stayed down.
"The market fell very hard and there were no buyers," said Marcin Sadlej, head of economic research at CDM Pekao Securities. "Somehow Polish investors are more skeptical than the U.S. investors."
A weak zloty and less than encouraging industrial output and inflation figures didn't help an already volatile market, analysts said.
"I think the weakness of the zloty was one of the main reasons for the drop we had two or three weeks ago," Sadlej said.
Rafal Wiatr, an economist with Citibrokerage and Salomon Smith Barney, said unimpressive inflation and industrial output figures for March kept investors cautious, especially prior to a series of holidays.
And they've been especially cautious with IT stocks, Wiatr said, even though just about everything was down for the week, which closed Friday at 19,041 points, down 7.9% from the previous week.
Some of the hardest hit were Prokom, down 10.71% to zl. 175 last Thursday; Optimus, which closed at zl. 182, down 10.57%; and Comarch, down 10.45% to zl. 197. ComputerLand, with zl. 93 per share, was down by 13.89%, and Telekomunikacja Polska (TPSA) closed at zl. 31, down 10.14%, Wiatr said. And Elektrim shares fell an alarming 19% on the week to zl. 55 per share.
Despite the current high-risk environment for IT stocks, though, TPSA managed to hold on to an "outperform" rating this month from Salomon, while being marketed as a "high-risk investment."
In its April emerging markets telecommunications services report, Salomon Smith Barney listed unchanged "outperform" recommendations for TPSA and the Czech Republic's Cesky Telecom, while Hungary's Matav was upgraded from "neutral" to "outperform." Despite its high-risk label on TPSA, the brokerage has retained its recommendation after the telecom company had been upgraded to "outperform" last month.
"TPSA is moving in the right direction, but there are a number of uncertainties in its operating environment," said Vladimir Postolovsky, a Salomon Smith Barney analyst who covers the Polish telecom market and is one of the report's writers.
Telecom regulations in Poland are not as clear as those in Hungary and the Czech Republic, he said. In addition, competitive pricing in domestic long-distance calling has been introduced prior to the completion of tariff rebalancing. Postolovsky said tariffs must be approved by the government, and there is no clear-cut formula for rebalancing them.
TPSA also still lacks a strategic investor. The government is now selling a 25-35% stake to a foreign telecom. At the moment, 85% of TPSA is in the hands of the Treasury Ministry, while the other 15% is floated on the Warsaw and London exchanges.
According to Salomon Smith Barney's forecasts, in 2000 TPSA is set to generate zl. 16.8 billion ($4.1 billion) in sales revenue, compared to sales revenue of zl. 13.4 billion ($3.4 billion) in 1999. The expected net profit for 2000 is to reach zl. 1.4 billion ($341 million), compared to zl. 920 million ($235 million) in 1999. TPSA closed at zl. 31 per share last Thursday.
