WSE plunges to 2000 low
The Warsaw Stock Exchange (WSE) hit a 2000 low last week as analysts warned that the market could drop even further amid concerns over international oil prices and the state of the Polish economy.
The all-share WIG index fell below the 15,000-point psychological barrier to 14,929 points, 9% down from the previous week and its lowest level in 12 months. Weekly volume rose zl. 472.7 million ($102 million).
"The sentiment is getting worse," said Mariusz Pawlak, a broker for SG Securities, a local unit of French bank Societe Generale. "There is no chance for any rebound soon," he said. He estimated that the market would continue to go down by another 5% in the coming weeks.
But he was cautiously optimistic that the market would not drop too much in the long term. "It looks like we're very close to the bottom," he said.
Market watchers said the WSE was a victim of worldwide worries over problems in the Middle East, rising oil prices and a bear run on the New York Stock Exchange, which also hit a yearly low last week, Pawlak said.
In addition, developments in Poland's capital markets and economy have put many investors off buying stocks.
Recently the treasury announced it would sell a portion of its stakes in blue-chip companies KGHM Polska Miedz, Telekomunikacja Polska (TPSA) and Pekao bank. "The treasury plans to sell a 10% stake in KGHM, a 15% stake in TPSA and a few percent in Pekao," Pawlak said.
Because of this, he said, investors would probably prefer to wait for the ministry rather than buy on the stock exchange. "It doesn't pay to buy on the exchange when you can buy cheaper elsewhere," he said.
Also rattling the market last week were the Communication Ministry's plans to sell universal mobile telecommunications system (UMTS) licenses for E650 million-E970 million each an amount analysts said is overly optimistic (see story on opposite page). The steep price is too high for many telecom companies as they would not see a profit for three to seven years, Pawlak said. As a result, telecom stocks are perceived to be riskier than before.
Exposure to the telecom business could be the reason for the recent slide in KGHM's share price, said Krzysztof Urban, analyst with Wood & Co. The copper/telecom giant settled at zl. 23.5 Friday, 13% down from last Friday and 25% lower than September's close.
KGHM's previous strong performance this year had largely been due to a strong dollar and high world copper prices. "KGHM has costs in zloty and revenue in dollars," Urban said. Copper prices were as low as $1,600 per ton last year, but have since risen to $1,940 per ton, he said.
KGHM traded at zl. 26.5 at the start of the year, zl. 32 during the spring and early summer, and zl. 31.5 until September.
"It's obvious that KGHM is not doing well at the moment," said Urban, who lists exposure to the telecom business, an overall bear market and government plans to sell its 10% stake in the coming months as major reasons for the company's poor performance.
But Urban said that compared with other world copper producers, KGHM remains relatively cheap. "It's undervalued," he said. Urban added that KGHM should be traded at zl. 40 a share. "That would be a fair price," he said.
