Traders bullish on Poland's old economy
It could have been worse. Buoyed by equity exposures of pension funds, last week the Warsaw Stock Exchange (WSE), though recording losses, performed better than most markets throughout Europe and the United States.
As computer-related selling streaks continued in the United States, with more firms adding earnings warnings to an accumulating pile, the NASDAQ Composite Index lost 4.03% Thursday alone, slipping to 2597.9 points.
Warsaw's all-share WIG index lost 2.54% and was at 16347.1 points at week's end.
The new-economy TechWIG, however, was down a considerable 7.35% to 1237.4 points.
"This sector reacted to NASDAQ," said Piotr Dudzinski, a Citibroker broker. "Companies like Optimus, Prokom and ComputerLand fell during the week." The IT and computer companies dropped 13.33%, 15.85% and 8.94% respectively to zl. 97.5, zl. 154 and zl. 107 per share. Just a month ago, software producer Prokom was trading at zl. 204 and systems integrator Optimus at zl. 160, Dudzinski said.
Fixed-line phone operator Netia was also down a hefty 12.22% to zl. 63.2. Poland's blue chips fared better than the new economy issues, though aside from several banks, most saw slight losses. The large-cap WIG 20 was down 3.05% last week to 1626.3 points.
Nevertheless, "we came back to the real economy, to the old economy," Dudzinski said.
Polski Koncern Naftowy (PKN) Orlen, the nation's largest oil company, was down 1.46% to zl. 20.20 on news that talks are underway with Hungary's oil and gas giant MOL over teaming up to form an alliance.
At this point, what that alliance might look like and who else it might involve is discussion for the future; the two sides only recently gained permission from the governments of Poland and Hungary to ally themselves.
"This comes after Russian Gazprom is trying to buy TVK and Borschdchen," said a London-based analyst who asked to remain anonymous. The two gas companies being targeted by Gazprom are located in Hungary.
Dudzinski said an alliance would strengthen PKN Orlen and MOL against aggressors like Gazprom and Lukoil.
The London analyst said PKN Orlen would gain from the synergy in the downstream sector which includes oil refining and marketing and that MOL, which imports oil at European rates but sells at subsidized rates, would not benefit as much.
While Poland's gas is sold mostly by the state-run Polish Oil and Gas Co. (PGNiG), Hungary's MOL deals in both oil and gas.
Aside from the trusted old economy stocks like PKN Orlen, it's the new pension funds that are supporting the WSE at present, Dudzinski said. When the funds hit the markets in early 1999, their equity holdings were quite low. They've gradually picked up and by the beginning of November, 25-28% of their exposures were in equities.
The pension funds, of which Commercial Union, Nationale Nederlanden and Powszechny Zaklad Ubiezpieczen are among the largest, are obliged by law to invest 60% of their assets in government papers such as treasury bonds while up to 40% may go into equities. From the latter allowance, which currently equals just over 30% after a two to three point rise in November, about $600 million flows through the market every month, Dudzinski said.
A signal that the market can expect upward trading in coming weeks, he said, is renewed interest in Polish companies from foreign fund managers who've been inactive on the market for some time.
