Stocks expected to rebound
The region remained weak, but the Polish market was relatively strong. The main factor causing investors to refrain from bargain hunting was US inflation figures and the Fed's new interest - rate outlook, which increased expectations of more hikes this year than previously expected. This caused capital to continue to return home. The greenback was stronger, and emerging markets saw a sell-off.
The złoty took a hit for the second consecutive week. The USD/PLN cross lost more than 10 percent, which might already be interpreted as panic. The most speculative long positions in Polish currency and stocks are already covered, and investors should look again at the fundamentals. The interest of foreign investors in stocks listed on the WSE is still high however, and only fresh capital can bring new gains.
Polish stock prices presented in dollars instead of złoty don't look so optimistic for foreign investors. A nine percent loss in the WIG20 and 10 percent in the złoty adds up to a 20 percent loss relative to what was happening a month ago. The volume in the recent bear market has been relatively low, which might suggest investors are not willing to leave the market now and are waiting for a rebound.
The złoty's losses still haven't begun to help export stocks. KGHM, the largest European copper producer (and which denominates revenues in US dollars) should pick up value if the uptrend in the USD/PLN cross continues. The company estimates that it lost zł.1 billion last year due to currency hedging and copper prices exposure, and decided to cut hedging activities considerably this year. Among WIG20 stocks the strongest, was once, again oil company PKN Orlen, which profited from rising oil prices. IT and midcaps also showed some strength.
This week's Monetary Policy Council meeting should shed some light on the interest rate cutting cycle in Poland. The weaker złoty could raise inflationary worries once again and lower the market's expectations for cuts of up to 150 basis points this year. The reaction on bond and stock markets is obvious - bears will continue to reign on the WSE.
Adam Łaganowski, Warsaw Investment Group (WGI)
The złoty took a hit for the second consecutive week. The USD/PLN cross lost more than 10 percent, which might already be interpreted as panic. The most speculative long positions in Polish currency and stocks are already covered, and investors should look again at the fundamentals. The interest of foreign investors in stocks listed on the WSE is still high however, and only fresh capital can bring new gains.
Polish stock prices presented in dollars instead of złoty don't look so optimistic for foreign investors. A nine percent loss in the WIG20 and 10 percent in the złoty adds up to a 20 percent loss relative to what was happening a month ago. The volume in the recent bear market has been relatively low, which might suggest investors are not willing to leave the market now and are waiting for a rebound.
The złoty's losses still haven't begun to help export stocks. KGHM, the largest European copper producer (and which denominates revenues in US dollars) should pick up value if the uptrend in the USD/PLN cross continues. The company estimates that it lost zł.1 billion last year due to currency hedging and copper prices exposure, and decided to cut hedging activities considerably this year. Among WIG20 stocks the strongest, was once, again oil company PKN Orlen, which profited from rising oil prices. IT and midcaps also showed some strength.
This week's Monetary Policy Council meeting should shed some light on the interest rate cutting cycle in Poland. The weaker złoty could raise inflationary worries once again and lower the market's expectations for cuts of up to 150 basis points this year. The reaction on bond and stock markets is obvious - bears will continue to reign on the WSE.
Adam Łaganowski, Warsaw Investment Group (WGI)
