Thriller week takes investors for a ride
The Warsaw Stock Exchange (WSE) experienced a roller-coaster of a week as the zloty soared up and then down again while politicians sent out mixed signals about how to plug the budget gap. But amid the turmoil, many stocks, especially IT firms, enjoyed trading successes.
Late-week rallies saw the all-share WIG-index increase by 0.46% to 13,416.54 and the blue chip WIG20 rise by 1.38% to 1,207.84.
"Everything started with the abrupt plunge of the zloty on July 6, which caused share prices to skyrocket," said Artur Szeski, chief analyst at CDM Pekao securities. "This week was overshadowed by the government's debate over the budget gap, which was laid to rest on Wednesday when the cabinet accepted a compromise solution by the Finance Ministry. The market reacted enthusiastically on Thursday and shares soared again."
High-tech stocks spearheaded the upward trend with the TECHWIG index finishing 4.68% higher than the previous week. Prokom, Optimus and Softbank rose by 17.39%, 14.71% and 8.43% respectively.
Market watchers said there were several reasons for the rebound in IT shares. "Tech stocks were more affected by the earlier downward slide than the rest of the market, so the rebound was bigger," said Benita Mikolajewicz, equity analyst at ING Barings. Tadeusz Kozaczynski, TMT analyst at CAIB Securities, agreed. "Nothing major is happening with (IT firms') fundamentals, so it's only the earlier share depreciation that created the rise," he said. Kozaczynski added that IT stocks were beginning to look like bargains.
But it was positive news from the U.S. exchanges and, in particular, upbeat reports by American technology firms that gave Polish IT stocks an additional lift. "The positive developments on the U.S. markets spilled over to the WSE," Szeski said, adding that due to the deep discount on tech shares in Warsaw any good news in the past two weeks caused a spike, however short-lived. "Investors' behavior has been very speculative."
BRE Bank, which has invested heavily in the technology sector, rallied last week along with TMT shares. Its share price rose by 11.89% to zl. 96.90 on Thursday from zl. 86.60 a week earlier. According to Szeski, BRE Bank's shares had been particularly undervalued, paving the way for the healthy rebound. "The downward slide of technology firms in the last months has hurt BRE Bank, whose portfolio includes such companies as Optimus and Netia," he said. He added that the general stagnation in the corporate banking sector has had a negative impact on BRE Bank, which serves mainly corporate clients. Mikolajewicz said BRE Bank's share price had also been affected by the company's hefty investment outlays into the retail banking sector. "BRE Bank is now incurring big costs in the development of a retail network; its Multibank and the online mBank," he said.
Concerning the IT blue chips, Prokom rallied the most at 17.39% on the week. "Prokom is the largest Polish IT firm and at the same time it was the most undervalued," Kozaczynski said, adding that he thought Prokom would do well for the rest of the year.
As for this week, analysts aren't expecting the same level of excitement. "Next week should be calm," said Mikolajewicz on Friday. He said investors are waiting for companies to publish their second-quarter results, with the first reports due out July 20. "Everybody is waiting for Q2 reports, which won't be good," Szeski said.
