WSE tumbles amid recession concerns
The Warsaw Stock Exchange (WSE) tumbled last week, landing at its lowest point in more than four months by Thursday. The downward trend followed international markets and reflected concern over local and international economic turbulence, analysts said.
"We had a very big drop. I think that we may be very close to the bottom for the local stock exchange," said Marek Pokrywka, a stockbroker and chief of secondary markets with Dom Maklerski Banku Ochrony Srodowiska (DM BOS). "Almost everywhere is bad. Poland is not an exception."
While the U.S. Dow Jones industrial average, a gauge of blue-chip stocks, held its own last week, the tech-oriented Nasdaq Composite Index ended Thursday at its lowest close in two years. Warsaw investors appeared to take a cue from the tech index. The all-market WIG index fell 7.07% to 15,669.74 on the week, and the TechWIG was especially hard hit, shedding 12.14% to end at 1,101.81. Turnover was up slightly from the previous week but still moderate at zl. 1.48 billion ($360 million).
"I think there is a very big fear that economic growth all over the world will be lower and investors are thinking about global recession. That is why the situation is very weak," Pokrywka said. The market is now oversold and could see a small upward blip, although Pokrywka said he doubted that the main downward trend will change and the WSE will likely continue an overall decline.
Tomasz Mazurczak, chief of research for Dom Inwestycyjny BRE Banku, said increased uncertainty about economic stability has tipped the scale against the market, noting especially fears of inflation in the United States, weak U.S. equity markets and instability in international markets. He said part of the cause is the financial crisis in Turkey that is rubbing off on other emerging economies.
Despite the concerns, hopes that the U.S. economy will make a soft landing and that Poland's economy will remain stable are assisting some sectors of the WSE.
"There is still a lot of power from the banking sector, which shows that trust in the economy from foreign investors is quite high," Mazurczak said. "IT and telecom fell. Those are internationally correlated, while banks, which constitute the proxy for unique Polish macroeconomic risk, are still relatively strong."
Telecom operator Netia dropped 17.96% to zl. 53 on the week, while tech firm Optimus dived 16.98% to zl. 79.2, indicative of investor attitudes toward firms in the high technology sphere.
Wielkopolski Bank Kredytowy (WBK) was the strongest performer in its sector, rising 7.3% to zl. 26.50. One of the WSE's more heavily traded stocks, Polski Koncern Naftowy Orlen (PKN Orlen), continued to drag the market. The oil refiner and retailer slid two weeks in a row, following a reported 58% drop in its fourth-quarter net profit and later announcements concerning involvement in German refineries. After a 5.5% drop two weeks ago, the stock dwindled another 8.1% last week to zl. 18.15.
"The downward trend with PKN (Orlen) was worse than expected," said Pawel Borys, an analyst with Erste Securities.
Market watchers also remain focused on interest rates and the Feb. 27-28 meeting of Poland's Monetary Policy Council (RPP). "There is concern about ... high interest rates and speculation on what the Monetary Policy Council will do," Borys said. "It will be positive for the market if the cut is higher than 150 basis points. If it's not, that will send a negative signal."
