WIG soars to seventh consecutive high
The market hit an unprecedented four consecutive all-time highs last week, despite a 100-basis-point interest rate hike and continued bad news about the current account deficit.
The all-share WIG index rose 4.9% on the week to close at 22,823.5 points, the seventh record high in less than a month. Volume shot up 35.95% to zl. 2.2 billion ($548.3 million). "I think we have around seven (telecom and IT) companies that are trying to catch up with the (New York-listed) Nasdaq index," which also broke through its all-time high last week, said Pawel Puchalski, an analyst at Dom Inwestycyjny BRE Banku. "Unfortunately their influence on the WIG is so high that they're pulling the whole market upward."
As in previous weeks, IT stocks skyrocketed, with Optimus showing the greatest gain, up 44.8% on the week to close Friday at zl. 292.5 per share. But Softbank and Prokom were close behind, rising 31.2% and 30.40% to finish at zl. 349 and zl. 321 respectively.
Puchalski said the rally in IT stocks could yield negative consequences because the rises are being spurred by speculative capital flowing into Poland. That capital could quickly turn around and exit the country, leaving small investors here with worthless stocks. At the same time, he said that non-tech related firms are performing badly, with the MIDWIG index dropping 2.4% last Thursday, and 3% on Friday. While the WIG-20 index comprises the Warsaw Stock Exchange's (WSE) top 20 stocks, the MIDWIG comprises the 40 next-largest publicly traded firms.
"I think the majority of stocks are responding to what's going on in the worsening macroeconomic situation," he said.
While blue-chip stocks are likely to hold steady in the meantime, the negative current account deficit, last week's hike of one percentage point for all key interest rates and expected rising inflation are already pulling other stocks down, he said.
Indicative of the trend are declining inflows to the banking sector, with BRE Bank showing the deepest decrease last week, down 12.59% to close Friday at zl. 118. But Bank Slaski and Bank Handlowy also fell, decreasing 6.21% and 5.38% to close at zl. 272 and zl. 61.5 respectively.
In other banking news, Deutsche Bank was dealt another blow in its bid for control of BIG Bank Gdanski (BIG BG) last week, after a regional court in Warsaw suspended BIG BG's supervisory board. The court decided that BIG BG's board, elected at a general shareholders meeting Feb. 11 that was dominated by backers of the German bank, may have been chosen illegally.
However, analysts said that the snag is only temporary, and Deutsche will eventually take over BIG BG. "It's just a question of time as to when Deutsche takes full control," said Marek Juras, an analyst at Erste Securities Polska.
Juras said Deutsche and its allies now control around 48% of shares in BIG BG and will up that figure to 53% when insurer Powszechny Zaklad Ubezpieczen (PZU) gets the green light to sell its remaining 5.6% stake in the bank. However, that sale, which is currently on hold while a court decides whether PZU has the right to sell its stake, could be delayed for a few months, Juras said. PZU's management had signed a "secret" deal with Deutsche, promising to sell its shares in BIG BG to the German bank.
BIG BG's share price soared 26.58% last week to close at zl. 20. The rise "was in anticipation of a battle for the remaining shares on the market," said Artur Szeski, an analyst at CDM Pekao Securities.
