Tech stocks take a beating in down week
The market put the brakes on the recent attempt to push through its all-time high of 20,760, dropping early in the week and drifting sideways for its remainder, analysts said.
The all-share WIG index dipped 2.64% on the week, closing Friday at 19,905.7, while volume fell 23.03% to zl. 1.337 billion ($326.1 million).
"After the rapid increase of the entire market (in recent months), it's a good time to take a rest," said Piotr Wozniak, an analyst at CDM Pekao Securities.
Next week will see little change, with the WIG fluctuating between 19,000 and 20,000 points, said Pawel Zach, an analyst at Citibank (Poland). While investors were focusing on the outcome of the Sejm's vote of no confidence in Treasury Minister Emil Wasacz, due last Saturday, attention will be pinned on the predicted 25 basis-point rate hike expected in the United States after the Feb. 2 meeting of the U.S. Federal Reserve.
Zach said that the market would only react nervously if Saturday's vote goes against Wasacz, but would then readjust to its current level. However, if U.S. rates are hiked above 25 basis points, " then it's bad news for equity markets in Europe, especially emerging markets," Zach said.
The poor showing of tech stocks, which have recently outperformed the market on a regular basis, was indicative of the slowdown last week. All main market IT companies experienced drops in share prices, with Optimus and Prokom showing the deepest dips, falling 13.65% and 9.37% respectively. Optimus finished Friday at zl. 99.3 per share, while Prokom closed at zl. 150. Wozniak said that investors decided to cash in their chips while prices were still high.
"They had increased much faster than the rest of the market, and it was time for profit taking," he said.
Blue chip stocks also saw declines. Elektrim fell 8.61% to close at zl. 43.5 on news that it will continue its dispute with Deutsche Telekom. Furthermore, the market was cautious of telecom stocks in general and is waiting for information from the Communications Ministry on new guidelines in the sector, Wozniak said.
However, other stocks saw steep price increases, such as Agros, which rose 28.68% to close the week at zl. 35. Zach said that information was scarce on why the stock had hiked. However, with France's Pernod Ricard owning 52% of Agros' shares, speculators could be taking advantage of the stock's low liquidity to affect the price, Zach said. There is also a possibility that some investors knew of a bid for the firm and bought into Agros accordingly, he said.
Bank Handlowy's share price increased 10.15% last week, based on rumors that Citigroup might be an alternative bidder for Handlowy if the merger with BRE Bank doesn't come through. Approved by the two banks' shareholders meetings in December last year, the merger was subsequently protested by Handlowy shareholders Powszechny Zaklad Ubezpieczen (PZU) and the Treasury Ministry. The shareholders have filed a lawsuit, and the court suspended the merger until it issues a ruling.
At the end of the year, however, Commerzbank, BRE's strategic investor, held talks with the Treasury Ministry on the stalemate. The deadlock, however, has spurred ongoing rumors that Handlowy, or its shareholders, may look for an alternative partner, such as Citigroup. "It's not as crazy as it seems," said Pawel Szymanski, a banking analyst with Schroders. "Citibank is interested only in a very specific group of retail customers, the same one Handlobank covers. And what it really needs is strengthened corporate banking."
