Weakening economy discourages investors
Stocks rebounded slightly, early last week, before resuming the downward slide that has marked the year so far. Technology and telecommunications equities continued to scrape along at 52-week lows, while the top-20 stocks and the overall market managed to hold on to some slight weekly gains.
"Generally we had quite an optimistic two days and that was it," said Marcin Sadlej, head of research at CDM Pekao Securities.
The all-market WIG index was up 1.99% to 15,294.98 points from the previous week's 52-week low, but still almost 30% off for the year; the blue chip WIG-20 gained 2.27% to reach 1,469.77 but was 37.2% below the year's start; and the TechWIG fell 0.91% to 993.93, a 52-week low. Trading volume was down 16.52% to zl. 1.24 billion ($31 million).
By Friday's close, the WSE chucked any gains it had picked up earlier in the week, with the WIG, WIG-20 and TechWIG bowing to 52-lows. The slight early bounce and late-week decline followed international trends. Though the blue chip Dow Jones Industrial Average rose five days in a row, the tech-oriented Nasdaq index started the week strong but stumbled Thursday, and European stocks started to pull back by the week's end. Asian markets also stepped back by Friday's close.
"The problem is we still have quite a weak economy," said Piotr Dudzinski, a senior stockbroker at Citibrokerage. "The real interest rates are quite high, it doesn't attract clients. Plus we follow other bourses and as long as these indices move downward, we will follow."
Adding to the Warsaw Stock Exchange's (WSE) woes, the local economy's big players are only mildly engaged in the market while foreign investors are sitting on the sidelines, analysts said. "The biggest players are pension funds and they will not help us," Dudzinski said. "Foreign investors are not interested. They are buying some stocks but this is not a hot time for Poland." Pension funds are sinking about 30% of their assets into equities and it does not appear they will go above that level.
Meanwhile, foreign investors are staying away because of concerns about the economy and a strong Polish currency. By Wednesday, the zloty hit record highs against the euro and a 19-month high vs. the U.S. dollar. The zloty slacked off a little but was still historically high at week's end. "For Polish investors the zloty does not have a tremendous impact but it frightens away international investors," Sadlej said.
International investors remain more attracted to bonds because of the zloty and high real interest rates, Dudzinski said. A weaker zloty in two or three months, additional interest rate cuts and inflation around 7% will help equities, he noted. "We can expect a better time for the Warsaw bourse in one or two months."
Despite the overall mixed performance on the WSE, Bank Slaski moved strongly when the Polish Banking Supervisor approved ING Group's acquisition of the bank's remaining shares. Netherlands-based ING, already Slaski's majority owner, made a tender offer to acquire the outstanding shares for zl. 265 per share, about 16.2% above Wednesday's close, according to ING.
Following the tender announcement, Thursday trade in Slaski shares on the WSE was suspended, but not before the stock closed at zl. 228, 5.5% higher than the previous session and 6.54% higher on the week.
Investors also kept a close eye on telecom group Elektrim, which Wednesday extended a deadline to sell control of its fixed-line telecom assets to Deutsche Telekom. The stock lifted with the market early in the week but uncertainty eventually pushed it down to zl. 32.30, 0.92% below the previous week.
"Investors are staying on the sidelines, waiting to see what happens," Dudzinski said of Elektrim.
