Summary

Last week was an example of disassociation of movements on the Warsaw Stock Exchange with world's major indices, where stabilization after a strong previous week was noticed. The German DAX rose by 0.5%, the French CAC40 index was down by 0,5%. Changes on Wall Street were even smaller – the DJIA rose 0.2%, while the S&P 500 by 0.1%. Publication season is in progress, but the highest volatility is generated FOMC meeting. More hawkish message only temporarily worsened sentiment as investors may perceive it as well in terms of reducing risks to the global economy and the expectations of the return of strong US labor market. US indices are not far away from record highs (barely 3% for the S&P 500), and are on track to test highs noted during holidays. In the euro area this distance is much greater (for DAX it amounts to 14%). In Europe there is a drip of QE program in the form of a high probability of its extension in December, and even a rate cut possibility in 2016. Having this in mind Europe is ready for a good end of the year, although tackling the records by indices will be difficult because of the distance from them.

On the other hand, in Poland, the situation is completely different. Despite the election results giving a clear message that one party government will be formed (that is theoretically stable) capital is not coming back, at least for Polish stocks. Investors are not afraid of the GDP growth (Law and Justice party may want more to stimulate the economy with the MPC help and by stimulating consumption), while they fear the drainage of companies through taxes (banks, supermarkets) and economically dubious connections between mining and energy sector, to the detriment of the latter. The WIG20 fell last week by 2.2% to 2,060 points and technically has an open road to the 2000 pts. The mWIG40 also came out poorly and fell by 1.8%. The SWIG80 finished the week positively, rising by 1.4%. Looking at the structure of the decline a thesis of month end institutional capital departure from Poland can be put forward. On the other hand institutional investors may continue to discount the market potential of the new government. This second version is worse for the Warsaw Stock Exchange, as it may predict further declines in November.

Polish PMI will rather move to second place as there is a series of same publications from the Eurozone countries and the USA. Chinese PMI came out better than expected, but declines dominate in Asia anyway. Later in the week we will have PMI for services, but the most important will be Friday's data from the US labor market, supported by more public statements the Fed's members.

Technical Analysis

Graph 1. WIG20 daily. Source: Stooq

During the past week the WIG20 index lost 2.2%, which, while neutral sentiment on the major stock exchanges, as well as taking into account the earlier weak week for large companies is highly disappointing. The WIG20 remained in a downward trend, and in addition with slightly increasing turnover. RSI oscillator is slowly approaching the overbought zone, but has still room to drop to support at 2,000 points. Negation of sales signal could be achieved after breaking 2,150 points, but really only move above 2,200 points would be a stronger indication of the presence of the bulls.

Graph 2. Eurocash daily. Source: Stooq

For the stock of week we select Eurocash, which, despite a difficult environment was able to grow by 3.6% and more than 5% the week before New local maximum was set at PLN 52.47 and this is close to the end of the week level. Short-term drop below 50 PLN would negate the buy signal. Cautious is required when analyzing the growth potential of Eurocash. The oscillator RSI shows a bearish divergence, and the course itself firmly torre from the line upward trend. In extreme cases, a strong correction can mean descent up to 44 PLN.

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

This material is intended to be for informational purposes only and does not constitute any investment, legal or tax advice or any other type of advice nor constitute an offer according to the Civil Code or a public offer within the meaning of the Act on Public Offering. MM Prime TFI SA has done due diligence to ensure that the information contained in this presentation is accurate and based on reliable sources. MM Prime TFI SA is not responsible for the accuracy and completeness of the information, nor for any damage that may arise from the use of it. Nothing in this document should be construed as an investment advice. The use of this material as the basis or evidence to make an investment decision takes place at the sole risk of the person who takes such a decision. This material is available free of charge.