Złoty and WIG20 recover
The Monetary Policy Council (RPP) decided to cut interest rates by the expected 50 basis points (bp), which helped debt and stock markets. The main interest rate fell from 6.5 percent to six percent, while the RPP kept its positive outlook for further cuts.
The WIG20 rose 1.5 percent during the week, with Bank Pekao SA leading the market. Financials were profiting from the interest-rate cut and the bright outlook for further cuts this year. The Polish market, however, wasn't that strong if we look at other emerging markets. The reasons are simple - the last sharp correction of a long-term bull market was relatively small in Warsaw, compared to Budapest or Latin American markets. The Polish economy also faces political risks - presidential and parliamentary elections - and is thus treated cautiously by foreign investors.
On the other side of the market was TP SA, which fell due to a change in its job-cut plans. The planned 3,500 job reduction was changed to 2,800 after talks with the unions. TP SA fell two percent after the news.
Employment reduction and a regional sales network restructuring plan was announced by PKN Orlen, and was relatively well accepted by the market. Trade unions were unhappy about the plan, but the cost-cutting means are necessary in order to increase PKN stock valuation. The company's Q4 2004 results were good but somewhat disappointing, considering the strong złoty and favorable oil-price environment.
The return measured by the WIG20 blue-chip index ended at 1,998 points, 1.6 percent higher compared to the end of Q4 2004. Those who took profit in February can show their trustees gains of six percent or more. The 'buy and hold' strategy clearly doesn't work in Poland as well as in any emerging market. Pension funds (OFEs) still hold almost 35 percent in stocks - the regulatory limit is 40 percent. If the Polish stock market is to grow this year, it needs capital from foreign investors. This however can be difficult in an environment of falling GDP growth, along with growing political risk and portfolios filled with stocks.
The FX market was relatively calm after the euro lost five cents in the second half of March. The top event of the week was nonfarm payroll figures, which were an unpleasant surprise for the market. Payrolls rose, and the euro recovered above the $1.30 level after the news was announced.
The Polish złoty strengthened after the interest rate decision. Theoretically, the lower the interest rate, the weaker the currency rate. But in the złoty's case the whole FX market currently depends on bond holders. Despite the weakening of the złoty by more than 10 percent in March, bond and bill yields remained stable. The dollar lost more than 10 groszy from its peak of zł.3.25. The outlook still remains negative for the złoty and the long-term trend seems to be broken.
The WIG20 rose 1.5 percent during the week, with Bank Pekao SA leading the market. Financials were profiting from the interest-rate cut and the bright outlook for further cuts this year. The Polish market, however, wasn't that strong if we look at other emerging markets. The reasons are simple - the last sharp correction of a long-term bull market was relatively small in Warsaw, compared to Budapest or Latin American markets. The Polish economy also faces political risks - presidential and parliamentary elections - and is thus treated cautiously by foreign investors.
On the other side of the market was TP SA, which fell due to a change in its job-cut plans. The planned 3,500 job reduction was changed to 2,800 after talks with the unions. TP SA fell two percent after the news.
Employment reduction and a regional sales network restructuring plan was announced by PKN Orlen, and was relatively well accepted by the market. Trade unions were unhappy about the plan, but the cost-cutting means are necessary in order to increase PKN stock valuation. The company's Q4 2004 results were good but somewhat disappointing, considering the strong złoty and favorable oil-price environment.
The return measured by the WIG20 blue-chip index ended at 1,998 points, 1.6 percent higher compared to the end of Q4 2004. Those who took profit in February can show their trustees gains of six percent or more. The 'buy and hold' strategy clearly doesn't work in Poland as well as in any emerging market. Pension funds (OFEs) still hold almost 35 percent in stocks - the regulatory limit is 40 percent. If the Polish stock market is to grow this year, it needs capital from foreign investors. This however can be difficult in an environment of falling GDP growth, along with growing political risk and portfolios filled with stocks.
The FX market was relatively calm after the euro lost five cents in the second half of March. The top event of the week was nonfarm payroll figures, which were an unpleasant surprise for the market. Payrolls rose, and the euro recovered above the $1.30 level after the news was announced.
The Polish złoty strengthened after the interest rate decision. Theoretically, the lower the interest rate, the weaker the currency rate. But in the złoty's case the whole FX market currently depends on bond holders. Despite the weakening of the złoty by more than 10 percent in March, bond and bill yields remained stable. The dollar lost more than 10 groszy from its peak of zł.3.25. The outlook still remains negative for the złoty and the long-term trend seems to be broken.
