WSE surprisingly embraces rate hike
The market experienced a dramatic upsurge last week after the Monetary Policy Council (RPP) decided to drastically hike interest rates in an attempt to curb inflation. The market also benefited from news that the Sejm had finally passed the embattled tax bill.
In an ironic turn of events, the all-share WIG index shot up 6.5% to close at 15,431.20 on Friday, with most trading following the RPP's announcement on Wednesday that it raised the discount and Lombard rates by 3.5 percentage points to 19% and 20.5% respectively, and the 28-day intervention rate by 2.5 percentage points to 16.5%.
"The major news was the interest rates and the effect on the market was very positive," said Zbigniew Lapinski, an analyst at Deutsche Bank. "Normally such an increase should make the equities market go down substantially, but this week was completely the reverse."
Volume stood at zl. 645.1 million ($153.6 million), compared to zl. 326.9 million ($77.83 million) during three days of trading last week.
Whereas a rate hike would normally depress the market as investors would then turn their attention to more secure fixed-income investments, this week's announcement combined with news that the tax bill had finally passed the Sejm laid to rest much of investors' queasiness, analysts said. Passing of the tax bill allayed foreign investor fears that Deputy Prime Minister and Finance Minister Leszek Balcerowicz would resign over the issue, Lapinski said. Balcerowicz is seen as the key figure responsible for promoting fiscal discipline within the government.
Indicative of the rebound on the market was the performance of Telekomunikacja Polska (TPSA), the biggest listing on the Warsaw Stock Exchange (WSE). TPSA's share price has been slightly depressed recently, but the stock rose 16.3% over the week to close Friday at zl. 24.8 per share. That is in spite of the fact that investors are not clear how the company's privatization will turn out. The Treasury Ministry has talked about delaying the sale of 25-35% of the telephone monopolist until next year if bidder France Telecom does not meet the government's price expectation.
Troubled conglomerate Elektrim also experienced an upsurge, rising 19.6% on the week to close at zl. 32.9. Elektrim has bounced back after hitting an all-time low of zl. 25.9 two weeks ago, as investors temporarily speculated that the company's debt load could eventually push it into bankruptcy. After hitting the low, Elektrim suddenly became seen as a cheap buy by several brokerage houses, which summarily upped their recommendations on the stock, said Michal Mierzwa, an analyst at Centrum Operacji Kapitalowych Banku Handlowego.
Also in the news this week was oil giant Polski Koncern Naftowy (PKN), which is undergoing an initial public offering (IPO). The company, which debuts on the WSE Nov. 26, is set to become the second-largest listing on the exchange. PKN is selling 30% of its shares in the offering, the subscription period for which ended late Friday. While the final share price was unknown at press time, analysts expected the company to list at zl. 20-zl. 22 a share.
"This price makes sense and it is reasonable to buy now, in particular for individual investors who will get a 6% discount," said Pawel Zach, an analyst at Citibank (Poland).
Mierzwa said that when all was said and done, the offering to retail investors could be 10 times oversubscribed. PKN's depth and liquidity make it a must-have for institutional investors, Mierzwa said. "They must invest," he said. "PKN has good long-term recommendations."
