WEEKLY COMMENT MM PRIME TFI S.A. - March 3, 2015
As it was in February, we have witnessed a very weak Warsaw blue chips’ strength comparing to European counterparts last week. Weaker banking sector condition, which cannot recover after rapid appreciation of the Swiss franc, was the problem of the largest companies’ index. On the other hand, small companies benefit from the favorable economic situation. The sWIG80, weak in 2014, successfully cut losses and fell the best in several consecutive trading days statistics. The exchange on Wall Street has ended the week in the red. Good moods continuation was evident on European stock exchanges. The German DAX has performed particularly well. It reached another historical highs last week. The March QE program launch should maintain a good sentiment, pushing European indexes to even higher levels.
The Warsaw indices recorded typical for the past fewweeks distribution of increases at the end of the week. A slight advantage in demand was noticeable among the largest companies, whereby the WIG20 and the WIG30 rose by 0.8% and 1.2% respectively. Medium and small companies have performed better, with an increase of 2.2% and 3%. Traditionally, indexes in developed countries have increased more than Polish blue chips. The DAX gained 3.2% and the the CAC40 appreciated by 2.5%. Hope for growth among Polish investors should be reflected in the forthcoming bond purchase program and the possibility of investing surplus liquidity from developed countries on the Warsaw Stock Exchange. The S&P500 recorded a minimum decrease during weaker week. In the past three weeks of February, the index increased quite significantly, so the cease of growth is ordinary, due to the absence of positive economic data.
The beginning of March will bring investors some important data from Poland, the Eurozone and the US. The first two mentioned cases concern primarily interest rates. On Wednesday, the Monetary Policy Council will decide, and a day later we will get to know the move of the European Central Bank. At the end of the week we will look at a range of substantial data from the United States, including the foreign trade balance, unemployment rate, hourly wage and the length of the working week. Traditionally, the market will look at the nonfarm payrolls. The indicator surprised positively last month, reaching 257 000 compared to the forecast lower by more than 20 000. Another good data would allow to continue achieving new historical peaks by the S&P500.
Graph 1. WIG20 daily. Source: Stooq
From a technical point of view, the situation of the largest companies has not changed significantly. Albatross around blue chips’ neck are banks, whose problems make it difficult for the index to break the downtrend line visible on the chart. In this context, the next week will be important, because the market will fight for the breakout of this resistance. The objective would be the level of 2415 points from July previous year, according to the positive scenario. Bounce from the resistance, in turn, could lead even to test the support at 2,300 points.
Graph 2. Amica daily. Source: Stooq
The company Amica is in technically interesting situation. Quotations of the largest Polish manufacturer of large household appliances have reached historical highs last week. Thus, just before the Friday’s publication of the consolidated report for the fourth quarter of 2014, there has been a breakout from consolidation lasting year and a half. Particularly important is to break the resistance at 117.02 PLN. Keeping the price above this level after the publication of the consolidated report will result in follow-up of the increases. The target is estimated at 132 - 149 PLN in this year's recommendations of analysts. Technically, we estimate it at 135 PLN.
Authors: MM Prime TFI S.A. Investment Management Team
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