14-03-2016

Weekly comment MM Prime TFI - March 14, 2016

Summary


At the beginning of the last week most stock markets were in a sideways trend. Meanwhile, investors awaited the ECB’s decisions. The Governing Council did not disappoint them. The interest rates were cut and the quantitative easing was expanded. In addition, the ECB expanded the range of assets it will purchase to include high – quality corporate bonds. What is more, the ECB declared the launch of the TLTRO II program. As a result, stock markets grew sharply. Nevertheless, a little later Mario Draghi reiterated that further cuts of interest rates would not be anticipated. Thus, the indices changed the direction and went down rapidly. Friday brought a correction which helped stock markets to end the week in the green. French CAC40 rose by 0.8% and German DAX took off by 0.1%. Unlike to them, British FTSE250 fell by 2%. In the US, the DJI went up by 1.2%, the S&P500 increased by 1.1% and the NASDAQ grew by 0.8%. It is worth noting that the economic data’s releases were in the background. In the Eurozone the Sentix index failed. On the other hand, the GDP growth in the fourth quarter stood at 1.6% y/y vs 1.5% expected. Investors learnt also Chinese balance trade. Its value was lower than expected. Moreover, the dynamic of the industrial production and the retail sales failed as well. It is also worth paying attention to the oil price which approached the level of 40 dollars per barrel.

The WSE also moved towards north. During the whole week, the WIG20 rose by 2%, the mWIG40 took off by 1.2% and the sWIG80 increased by 0.9%. In the past week investors did not learn any new economic data. Nonetheless, their attention was paid to the MPC which did not change the interest rates. Furthermore, some companies which published their financial results were in the limelight of the investors. On the other hand, the confusion about the Constitutional Tribunal was worrying. It may adversely affect the market sentiment.

In the current week, investors will learn some new economic data from Poland: the CPI, the trade balance, the dynamic of the industrial production and the retail sales. It is worth paying attention to the data from the Eurozone as well – the industrial production and the CPI. In the US, there will be many publications of the economic data. Pay special attention to the dynamic of the industrial production and the retail sales. Nevertheless, the FOMC meeting will be the event of the week. The council’s members will make a decision on interest rate.


Technical analysis


 
Graph 1: WIG20 daily. Source: Stooq.

The WIG20 continued a short – term upward trend and ended the week at the level of 1,910 pts.. The bottom line is that the line of a long – term downward trend was overcome. Furthermore, the index broke a psychological level of 1,900 pts.. Upcoming sessions may bring a test of this support. If the WIG20 manages to stay above this level, it will be a confirmation of the upward trend. Otherwise, the market will be probably dominated by bears. Nonetheless, the RSI oscillator did not indicate any signals. Therefore, it seems that the prospects are promising.



Graph 2: Alior daily. Source: Stooq.

We chose Alior as a company of the week. During the whole week, its share price rose by 12.3%. Certainly, such a significant growth was caused by PZU Group which increased its stakes in Alior from 19.97% to 25.23%. However, the share price has been in an upward trend since the beginning of the year. The RSI oscillator may indicate a sell signal soon. Thus, the resistance at PLN 70 may be too strong to break. As a result, a correction towards the support at PLN 65 can be expected. On the other hand, in the medium – term there is a probability of the third upward wave’s realization.

Authors: MM Prime TFI S.A. Investment Management Team


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