Speculation over bank merger price adds some life, volume to market

The main force behind life in the market was news on the merger of Bank Handlowy and BRE Bank. But even before this was officially confirmed by bank representatives, Handlowy's price started to climb, rising 4.6% to zl. 68 during Wednesday's fixed-price auction, and later closed in continuous trade at zl. 71.
Total volume of trading in Handlowy's shares amounted to zl. 112 million ($28 million). On Thursday, the share price of the bank reached its high of zl. 74.50, but then fell 6.7% on Friday.
"The high volume of trading in Handlowy could be seen for the last two weeks, as investors were expecting that someone might buy the bank," said Adam Kalkusinski, salesman with Wood & Co. "They took the opportunity to sell when the stock reached a high level on Thursday."
He added that market makers in London were buying the stock expecting increased interest in the bank from investment funds, but had to sell on Friday as the funds turned out not to be so keen to purchase until more analyses of the merger are done.
Over the entire week, the share price of Handlowy increased by 5.3%, while BRE closed the week at zl. 127, or down 9.3%.
"The current prices of these two banks may remain at the current level for some time, but when more details of the merger are known the prices may go up again," Kalkusinski said. "The parity is expected to be more advantageous for Handlowy, that is why some investors are buying the stock and selling BRE."
The bank that would result from the possible merger would be the third largest in Poland, while its free float will be the largest on the market. "This depends on the decision on further privatization of PKO (Powszechna Kasa Oszczednosci Bank Panstwowy)," Kalkusinski said.
Last week began with investors taking profits after the previous week's price rises. The market then seesawed mid-week on rumors of the possible bank merger. The WIG index rose to 17,610.9 on Thursday, after the announcement of a possible bank merger, while volume of zl. 306.3 million ($76.5 million) was up 49.7% on the previous day. On Friday, the market turned down under profit taking.
In other sectors, Telekomunikacja Polska's (TPSA) climb to a 52-week high was a notable milestone, Kalkusinski said. Last Thursday, the stock traded at zl. 29.50, but fell to zl. 28.70 on Friday to close 2.5% above the previous week's price. "This was a general effect of the positive information on increasing the number of potential strategic investors for the company," Kalkusinski said. "Especially, that at the beginning of the year, no one expected TPSA would be traded in the range of zl. 30."
He also pointed to a 5.1% drop in Elektrim's price over the week. "It might have resulted from rumors that the closing of the company's deal with Vivendi could be pushed back a little," Kalkusinski said. "This would mean that Elektrim's announcements about its plans might have been too early." The company did not comment, he said. Last Monday, Elektrim said, however, that it had completed its acquisition of cable television company Bresnan International Partners for $310 million.