WIG20 crashes below 2,000 points
The Polish currency lost more than 5 percent, but the bond market remained calm. The WIG20 lost 3 percent and is 8 percent lower from the February's peak.
Investors fled from the Polish market, and capital returned home to America. The outflow from emerging markets was obvious as US treasuries behaved strongly in an overall downtrend caused by rising US interest rates. The expected interest rate cuts in Poland and hikes in the US in the next few days are to decrease the viability of the carry-trade strategy, which is based on interest rate differentials.
Polish inflation figures for February surprised in both producer prices and consumer prices data. Prices are rising at a slower pace than expected with CPI at 3.6 percent. The Monetary Policy Council, which convenes after Easter, is expected to cut interest rates by 50 basis points to 6 percent. The cut is already priced into debt and equity markets but could help relatively low-priced stocks.
The key support for the WIG20 is currently 1,870 pts. Sharp losses were not accompanied by volume, so there is a huge probability that foreigners are still long in Polish stocks. Pension funds (OFEs) are expected to keep their high interest in stocks, as March is the month were their returns are calculated.
Adam ¸aganowski, Warsaw Investment Group (WGI)
Investors fled from the Polish market, and capital returned home to America. The outflow from emerging markets was obvious as US treasuries behaved strongly in an overall downtrend caused by rising US interest rates. The expected interest rate cuts in Poland and hikes in the US in the next few days are to decrease the viability of the carry-trade strategy, which is based on interest rate differentials.
Polish inflation figures for February surprised in both producer prices and consumer prices data. Prices are rising at a slower pace than expected with CPI at 3.6 percent. The Monetary Policy Council, which convenes after Easter, is expected to cut interest rates by 50 basis points to 6 percent. The cut is already priced into debt and equity markets but could help relatively low-priced stocks.
The key support for the WIG20 is currently 1,870 pts. Sharp losses were not accompanied by volume, so there is a huge probability that foreigners are still long in Polish stocks. Pension funds (OFEs) are expected to keep their high interest in stocks, as March is the month were their returns are calculated.
Adam ¸aganowski, Warsaw Investment Group (WGI)
