WEEKLY COMMENT MM PRIME TFI S.A. - January 5, 2015
Last week was a second week of extremely low investment activity and the reason for this was of course a holiday period. New Year's Eve was a non-trading day across most of the stock exchanges. On top of this on many markets last day of the year was a half-day trading session. Surely this period was not conducive to not only activity, but also variability. On the WSE the WIG 20 with minimal variability lost 0.6%. Medium-sized companies performed fared better – the mWIG40 went down by symbolic 0.1% and by far the best small companies gathered in sWIG80, rose by 1.1%. It is true, however, that with such limited liquidity prices of this type of inactive companies could change randomly. It is also worth noticing that at the beginning of 2015 the WSE discontinued a publication of the WIG50 index and the WIG250, hence going forward we would be referring to new-old indices: the mWIG40 and the SWIG80.
Developed markets did not farewell 2014 with good moods. The DAXlost1.6%, the CAC40fell by1%, while the S&P 500dropped by 1.5%.Usually end of the year is associated withthe so-calledwindows dressingto increase annual profitnoted by funds. This yearSanta Claushas arrived earlier asNovember was quite a successful month for stocks. A weakerChicago PMIindexresulted poor performance during lastweek of the year. This index measures theeconomic situationof the manufacturing sectorin the mostindustrializedregion ofthe United States.
There is no point in being particular about last week as markets would only return to normal trade volumes this week. The mood on the WSE will probably be influenced by external factors. From Europe, PMI for the services sector would be released (Tuesday) with the estimated HICP inflation for December (Wednesday). This figure would be important due to the fact that deflation, which is expected, should be one of the arguments for ECB to consider in light of introduction of more unconventional economic stimulants. The most important information will flow from the US. On Wednesday, a log of the minutes of the December meeting of the FOMC would be released. This report is important as during this meeting a sentence of keeping interest rates low for an extended period of time was replaced with a phrase patience in raising these rates. Markets are curios of the details of the December discussion. In contrast, on Friday, December data of the unemployment rate and the increase in jobs in the non-agricultural sector will be released. Latest data surprised positively markets and this time investors are hungry for another strong reading.
Graph 1. WIG20 daily. Source: Stooq
Changes on the WIG20 last week were purely cosmetic. Index lost 0.6%, with very low trading activity. Generally, it was typical characteristic of past two weeks - minimal changes with little turnover. Current technical situation of the WIG20 is not great. Index manages to defend support for 2300 points, but still situation is unconvincing. At this level we have a consolidation. Breaking the 2350 barrier would only strengthen the power of the bulls. At this point, however, index is closer to a test 2300 and 2250 points. This is also a major support, because drop below this level would give a strong sell signal.
Graph 2. Enea daily. Source: Stooq
Enea has been chosen by us as the company of the week due to an attempt to rebound, generated in the last week. For many sessions the company was not in favor of most of investors, but at the level of PLN 14.50 demand has activated. The image is grey shaded by low trading activity, but it is just the domain of the holiday period. Currently the chances that the share price rose to 16.50 PLN are high, This is an important resistance resulting from an upward breakout of uptrend line by grouped peaks from September and October. Only raise of this resistance would mean that the bulls have the upper hand.
Authors: MM Prime TFI S.A. Investment Management Team
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