Stocks report: An emotional New Year

One cannot forecast the whole year after the first week. The current climate on the Warsaw Stock Exchange looks to be heated by optimistic media reports and positive developments on global markets. If the rally continues, the first symptoms of a bubble will be seen. The bright outlook for Q4 results are fully priced into stocks, and the emotional factor is starting to play the main role. Profits of foreign funds are multiplied by the strongest złoty to euro rate in four years.

One of the largest gainers last year, copper producer KGHM, has ceased to rise after UBS Investment Research released a downgrade and profit-taking recommendation. KGHM is a very important stock to watch at the moment, as it can trigger panic on the market if its price declines sharply.

Emotions could bring the WIG20 to the 3,000-points level very quickly, but every bubble ends the same way. The general strategy for investors in Polish stocks should in my opinion be "hold" and then "flee" as you see the bubble burst.

Adam Łaganowski,

Warsaw Investment Group (WGI)