U.S. market drives Warsaw exchange
Polish stocks advanced last week, gathering momentum from some positive corporate news and surging U.S. markets, though still uncertain domestic factors limited local gains, analysts said.
The market's next move is not clear and could be driven by a few big companies, international sentiment or the ongoing debate concerning the country's troubled budget, analysts said.
"I don't really see any companies that may move on the market one way or another (this week)," said Benita Mikołajewicz, an analyst with ING Barings in London. "International markets might contribute to Polish investors' mood."
The Warsaw Stock Exchange (WSE)'s blue chip WIG 20 index moved 1.9% higher to 1,282.37 points, the all-share WIG index climbed 1.7% to 14,348.15 and the TechWIG index rose 1.4% to 659.34 for the five-day period ending Thursday. Volume was zł 1.07 billion ($267 million), barely up from the previous week.
The WSE's rise was a turnaround from two previous weeks of deteriorating prices and corresponded with strong U.S. markets that broke important psychological barriers. The Nasdaq Composite Index last week broke the 2,000 level for the first time since Aug. 7 and the Dow Jones industrial average closed above the 10,000 level for the first time since Sept. 5. Strong forecasts in the technology sector helped drive prices, including upbeat comments from stalwarts Oracle Corp., Cisco Systems Inc. and Intel, Reuters reported.
In Poland, Telekomunikacja Polska (TPSA) helped lift the exchange. TPSA, the largest capitalized and heaviest traded stock, benefited from new management taking its road show to London and a new plan that stresses a fresh sales strategy, cost reductions, lower investments, labor force reductions and debt restructuring.
"The new management gave a good impression," Mikołajewicz said. "That might be a reason for the share price doing well."
TPSA rebounded from sinking share prices that were hurt two weeks ago by a Telecommunications Regulatory Office (URT) ruling that forced the company to cut interconnection fees with Poland's biggest cellular telephone group Polska Telekomunikacja Cyfrowa (PTC). TPSA, which has lost about 40% of its value since Jan. 1, sank dramatically following the announcement. But last week investors brightened and the company's share price picked up late in the week, eventually rising almost 1% to zł. 15.80 for the five days ending Thursday.
Even with the rise at TPSA, investors are still preoccupied by the budget situation. The Sejm last week discussed the 2002 spending plan as the government looks to avoid a massive hole in public finances.
Not all news from the fiscal debate has been bad for Polish firms. The government early last week decided to axe a planned rise in the value-added tax (VAT) rate on construction materials to 22% from 7% in 2002. The VAT increase was expected to generate zł. 1.3 billion ($325 million) in revenue for the state budget though wreak havoc on an already troubled industry.
"Of course we saw a big rise of many construction companies directly after this decision was announced - even a little bit earlier," said Rafał Jankowski, an analyst with Centralny Dom Maklerski Pekao. "I think that the possible results of the new regulation could have been catastrophic for plenty of companies in this sector."
The proposed tax increase resonated throughout the construction and related industries. Ceramics producer Cersanit, for example, reported a 44% month-on-month rise in sales of sanitary ceramics for November. The tiles and bathroom fixtures are used almost exclusively in the construction industry and analysts speculated that sales were boosted by expectations of the pending VAT hike.
The company's share price shot up 7.9% to zł. 30.20 for the week.
Any good news came too late for construction firm Betonstal, which stopped trading on the WSE Dec. 4, according to an exchange press release. The firm declared bankruptcy in Polish courts in November.
Jeff Sparshott
