WSE takes a dip and a vacation
The Warsaw Stock Exchange (WSE) fell off from its three-month high last week amid profit taking and some pessimism among investors.
"Assumptions behind the upward movement were checked by reality, particularly developments with the economy that were not good," said Michał Szymański, investment manager with ING BSK Asset Management. "And if you look at the government, the budget is still not there."
In a week truncated by a national holiday, the WSE's major indices still showed some growth but appear to have peaked Monday, when the blue chip WIG20 index approached 1,300 in intra-day trading, but ended the day about even at 1,260.53. From Tuesday to Wednesday blue chips lost 2.7%.
On the economic front, Poland's gross domestic product (GDP) is expected to grow a paltry 1.6%, according to a Central Statistical Office (GUS) announcement last week, and prospects for the year do not top a 2% increase amid signs of rising unemployment, weak wage growth, a still unresolved domestic budget deficit and an uncertain global economy. The world outlook is especially gloomy. The U.S. Commerce Department last week said the United States' GDP shrank 0.4% during 2001's third quarter, the sharpest decline in more than a decade. While Poland is somewhat insulated from developments across the Atlantic, Germany - Poland's No. 1 trading partner - is not.
"The industrial countries are already in the throes of recession, and the slowdown is very likely to worsen as the year winds down," said Deutsche Bank Research in an analysis.
"The risks facing many emerging markets are looming ever larger," the bank noted.
Corporate earnings helped fuel some ups and downs on the market last week, with Telekomunikacja Polska's (TPSA) net profit of zł. 1.17 billion ($287.6 million) in the first nine months of this year falling below expectations. The numbers also showed declining sales growth and deteriorating profitability as the company loses fixed-line clients and faces new long-distance competition.
TPSA, the largest listed stock in the WSE, saw its share price tumble earlier this year but the company helped lead the blue chip comeback during the past weeks.
In the banking sector, Big Bank Gdański (Big BG) saw its unconsolidated net profit rise 2.6% to zł. 20 million ($5.03 million) in the third quarter compared with the same period of 2000, according to preliminary results. Bank Ochrony Środowiska (BOŚ) endured an unconsolidated net loss of zł. 3.7 million ($902,439) in the third quarter, a sharp downturn compared with a zł. 19.9 million ($4.85 million) profit during the same time last year. And a Reuters poll showed that Bank Pekao is expected to post a strong rise in third-quarter net earnings when it unveils unconsolidated results Nov. 5. Pekao saw its share price hit a record high early last week.
Also in the financial sector, leasing firm Europejski Fundusz Leasingowy (EFL) saw its unconsolidated net profit drop 13% to zł. 43.8 million ($10.68 million) in the first three quarters of the year, according to announced results. The company is in the process of being bought out by France's Cr¯dit Agricole, which last week concluded a first tender to take a majority stake in the company, according to EFL financial analyst Artur Placzyński.
"Eventually (Cr¯dit Agricole) intends to take over 100%," he said. The French bank offered zł. 230 per share, slightly above the firm's zł. 225 opening on the last day of the tender but well above most analyst evaluations. When Cr¯dit Agricole in July signed an agreement to acquire almost 65% of EFL from company founder and chairman Leszek Czarnecki, the stock was trading around zł. 180 per share.
The Securities and Stock Exchange Commission (KPWiG) approved the takeover of one of the country's biggest leasing firms in September. Placzyński said that if the first tender for a majority stake is successful, a second tender will be offered so that all shareholders can sell at the premium price. The company is likely to be delisted from the WSE at the end of 2003.
Cr¯dit Agricole made a major move into the Polish market in June with the acquisiton of consumer credit provider Lukas Group. The French bank has more than 75% of the voting rights in Lukas, a company with almost 30% of the Polish consumer credit market.
Jeff Sparshott
