WSE gains despite poor Q3 results

The Warsaw Stock Exchange (WSE) last week bounded to levels not seen since late June as investors bought shares on hopes for an improving economy and a resurgent market in 2002.

"I think the market is expecting a recovery in half or three quarters of a year," said Piotr Kazimierski, co-head of equity sales at SG Securities.

The blue chip WIG20 index surged 6.7% to 1,330.03 points, the all-share WIG index jumped 5.3% to 14,555.98 and the TechWIG rose 6.1% to 732.51 for the five-day period ending Thursday. Volume was zł. 1.56 billion ($381 million), up sharply from the previous week.

Despite the strong gains, analysts were skeptical of new levels, especially following third-quarter earnings reports released last week that were, generally, weak.

"I really must say that there was no logical reason for this appreciation," said Tomasz Dumała, head of research for Bank Gospodarki Żywnościowej (BGŻ) brokerage. "Third-quarter consolidated results were rather poor in most cases, it was a factor that should have negated (the increase)."

Construction group Exbud Skanska was one of the biggest losers, announcing last week a zł. 177.8 million ($43.1 million) net loss in the third quarter, extending the zł. 3.1 million ($756,000) hole from the same period of 2000.

Kielce-based Exbud, majority owned by Swedish construction firm Skanska Europe, is suffering from a downturn in Poland's construction sector, according to the company. To cut back on costs, the firm last week announced the pending layoff of 4,000 white and blue collar workers throughout the Exbud Skanska group. The financial troubles have also forced the firm to call a Dec. 11 extraordinary shareholders meeting to discuss the company's future.

Overall the construction sector has tailed off during the past year and Exbud is not the only company to feel a pinch. Despite the bad news, the company's share price followed in the draft of the market's overall surge and ended the week up less than 1% to zł. 19.15 per share. On the year, however, the share price is down 39%.

Also in the construction sector, Warsaw-based Budimex announced a third-quarter consolidated net profit of zł. 22.4 million ($5.4 million), up 65% from the same period last year. The company's share price dropped 6.7% to zł. 22.40.

In the financial sector, Bank Pekao helped drive the market early in the week. The largest listed bank on the WSE reported a third-quarter consolidated net profit of zł. 359.9 million ($87.7 million). Bank Pekao, owned by Unicredito Italiano, has been an investor favorite this year and reached new highs following the announcement. For the week, the share price climbed 9.7% to zł. 84.50.

Most major banks gained on the week, with or without strong earnings. Powszechny Bank Kredytowy (PBK), owned by Germany's HypoVereinsbank, announced a consolidated net profit of zł. 17 million ($4.15 million) in the third quarter of 2001 and watched its stock shoot up 7.4% to zł. 97.70 per share. Bank Handlowy, owned by U.S.-based Citigroup, said its consolidated net profit was zł. 47 million ($11.46 million); its share price increased 4.5% to zł. 58. ING Bank Śląski, owned by Dutch ING Group, announced a zł. 68.3 million ($16.6 million) consolidated net profit and a 9% share increase to zł. 300. Bank Zachodni WBK announced a zł. 18.3 million ($4.46 million) consolidated net profit and saw its shares rise 18.9% to zł. 49. Kredyt Bank, controlled by Belgium's KBC, reported a consolidated net loss of zł. 38.5 million ($9.39 million) and watched its share price sink by less than 1% to zł. 18.

In the IT sector, computer group Optimus suffered a consolidated net loss of zł. 19.3 million ($4.7 million) in the third quarter, systems integrator Softbank said it lost zł. 10.2 million ($2.49 million) and software firm Prokom reported a consolidated net loss of zł. 16.5 million ($4.02 million). Optimus held steady on the week at zł. 53 per share, Softbank was up 6.2% to zł. 29.3 and Prokom jumped 11.7% to zł. 119.

Jeff Sparshott