Summary

A correction in major global stock markets started in May (it is said sell in May and go away). It cannot be ruled out if this month ends, the correction will finish. So far, this has not been seen in the European stock market indices, whose changes were inconsiderable and without any clear direction (the DAX went down by 0.3% and the CAC40 grew by 0.2%). This picture has suited to the WIG20 as well - a confirmation that the index of the largest Polish companies is driven by the foreign capital and correlated with major European stock markets. It should be noted that PKO BP showed good financial results, albeit those of PGNiG were much more better. As a result, their share prices rose last week, whereas these were only incidental occurrences in the whole index. Nonetheless, other Polish stock market indices were dominated by bulls. The mWIG40 soared by 1.02% and the sWIG80 took off by 0.85%. Therefore, the WIG ended the past week in positive territory (0.28%).

The movements of the small and medium – sized companies listed on the WSE were similar to those of the American stock market indices. However, these should not be a fundament to make any conclusions. Nevertheless, a correction impulse has had its sources in the US (Donald Trump’s dangerous games with secret intelligence and potential pressures on the former FBI boss). Moreover, it seems that Wall Street will give a signal to start a phase of a bull market. During the past week, the DJIA and the S&P500 rose by more than 1%. It was a partly result of tense political situation in the US, especially since the issue of the interest rates raise by the Fed remained in the background. The market paid special attention to the more dovish attitude of the Fed on the reinvesting interest on debt. On the other hand, the market has been getting used to the extravagancy of Donald Trump. A potential impeachment has seemed to be unrealistic, but low support for the president of the US and his variable nature may cause that he will give his power to more experienced politicians. Furthermore, investors focused on the macroeconomic data releases. A revision of the American GDP growth rate was very successful.

The beginning of the current week will be uneventful, because investors from the US and the Great Britain (two the largest financial markets centers) will have a day off on Monday. Subsequently, there will be a lot of macroeconomic data readings. Investors will learn the European PMIs for the manufacturing sectors, including the Polish one. The CSO will also present the final reading of the GDP growth rate in the first quarter of 2017 and the preliminary CPI. After all the publication of the American payrolls will be in the spotlight. In addition, it is worth paying attention to the readings of the Chicago PMI and the ISM Manufacturing Index. There will be releases of the HICP inflation for the Eurozone countries as well – these figures might be very important for Eurodollar.

Technical analysis

Graph 1: WIG20 daily. Source: Bloomberg

Last week, the market was undecided, so during the last five trading days, the WIG20 shrank by a symbolic 0.1%. However, last movements of the index were very important, as they were in proximity to an upward trend’s line. It should be noted that the last breakthrough of this line was not confirmed, especially since an all – out sale was not seen. A support level at 2,300 pts. is a very crucial short – term barrier. If the market breaks through this level, a way to the resistance level at 2,380 pts. will be opened. After all currently, the consolidation has been going on.

Graph 2: Ropczyce daily. Source: Bloomberg

This time Ropczyce deserved the company of the week name. During the past week, its share price increased by 8%. The stock price has been moving in a sideways trend for one year, albeit after a financial results’ release for the fourth quarter of 2016 it grew dynamically. Now the situation has been very similar and solid financial results for the first quarter of 2017 turned out to be an incentive to increases. The stock price rebounded from the support level at PLN 20, whereas the volume of trade was low. The breakthrough of the resistance level at PLN 22.4 was only temporary. On the other hand, cheap valuation multiples and low liquidity may encourage investors to buy Ropczyce’s shares. In this case, the nearest resistance level stands at around PLN 26.

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.

%MCEPASTEBIN%