Weekly comment MM Prime TFI  - August 24, 2015

Last week the People's Bank of China (PBOC) made the surprising decision to devalue the yuan. The renminbi has suffered its biggest drop since 1994. It was believed that the decision was aimed at strengthening Chinese exports, which has weakened recently. A cheaper yuan will help make Chinese exports more attractive and boost China’s economic growth. The PBOC explained that the devaluation was caused by a significant shift in how it manages the yuan by allowing market forces to play a bigger role in valuing the currency.

It seemed that the main Polish indices were effectively making up for losses from previous weeks. Unfortunately, declines returned again to the Warsaw Stock Exchange. Politicians, like the week before, contributed to the indices movements. On Wednesday evening, the lower house of the Polish parliament passed a foreign currency mortgage loans law, which enables borrowers to convert them into PLN. Banks will take on 90% of the costs of such conversions

Getting closer to autumn electionsmeans , moreideas and promises offered by polititians. They often concern important sectors of the economy, and indeed capital market itself. As a result, politicians often set trends on the WSE. Last week was an example of this. It had already begun a week earlier, with an information from the government regarding possible reduction of the tax on extraction of certain minerals.

Despite modest economic calendar, which theoretically translates to lack of incentives to serious movements in the stock markets, last week was not as boring as it was expected. On most stock markets, including the Warsaw Stock Exchange, supply prevailed over demand, which resulted in major indices drop over the week. In Polanddeclines were not, as usual ,the consequence of collapsing under its own weight, because they were accompanied by higher than usual turnover (probably supported by foreign capital).