01-06-2015

Weekly comment MM Prime TFI - June 1, 2015

Summary


Last week in the capital markets we saw correction that on some exchanges took quite a substantial size. First of all, this refers to the DAX, that declined by 3.4%. Other euro zone markets followed - CAC40 fell by 2.6% and the Madrid IBEX by 2.9%. Athens exchange, which is the main source of the problems, was not the worst, as it declined only by 1.8%. However we have to deal there with consolidation around recent lows. Some hopes of reaching an agreement with creditors to Greece emerged, and also speculation about the possibility of shifting tranches of debt repayments to the IMF in June (the first installment payable on June 5, a total of all payments is EUR 1.55 billion), but IMF spokesman denied that request for deferral of payment was sent. In turn, the head of the Fund Ch. Lagarde announced that no repayment will mean withholding funding. Greece meanwhile is waiting for a locked EUR 7.2 billion tranche of aid. The agreement was to be reached on Sunday, but this did not happen, and the prime minister of Greece blames his interlocutors about too technical tons and excessive expectations for the Greek reform programme. It promises to be quite turbulent week in the region, especially since June 5 on Friday. In addition, the week will be full of numerous data - PMI for the services sector and industry from Europe, similar US ISM index, the ECB and Polish MPC meeting and, finally, Friday's data from the US labor market.

Warsaw Stock Exchange last week also fell down, as victory in the presidential election of A. Duda has been received by the market as a first step to political change and the return of PiS party to power. This causes a slight increase in political risk. Crucial is announcement of the party and A. Duda regarding their policy towards banks. They want their repolonization, to bear the burden of the cost of Swiss franc loans and the introduction of additional bank tax. The market is primarily concerned about the risk of currency conversions of Swiss franc loans at historical exchange rates. During so unfavorable for banks low interest rate environment, this step would put some of them in serious trouble. Initially all banks declined, even those with no exposure to currency loans, like ING. However, one managed to make up for losses (the market efficiency worked), but generally banks were under a lot of pressure, and they weighed the most on the Warsaw Stock Exchange. WIG-Banks declined by 4.5%. This sector has a significant share in the WIG and WIG20 especially (approx. 35%). Blue chips, burdened by banks, fell by 3.1%. Much better did medium-sized companies (-1.7%), and small, where there are no banks, came almost to zero (actually fell by 0.2%). At the moment, however, some negative scenario is now priced, but it is surely an intermediate proposal between Duda announced a proposal to the PBA. Decisive should be global sentiment this week.

Technical analysis



Graph 1. WIG20 daily. Source: Stooq

Last week the WIG20 fell quite significantly by as much as 3,1%. This brings a pretty serious consequences in technical outlook. Index has broken the support level of 2476 points and, consequently, the consolidation in flag pattern has failed. The turnover didnt’t grow much, but there were small, which shows little number of sellers. Currently it is possible to re-test the level of 2476 points (as a resistance), but its break might not be easy. Looking at the up-trend line and the level of the previous peak, support zone between 2375 and 2400 points can be consider as important. 


Graph 2. CI Games weekly. Source: Stooq

CD Projekt has chosen as week company in a one of recent analysis. Last week another game company CI Games deserves on this title. Share price up by 15,2%, beating the important resistance at 9,20 PLN. Today, share price facing with another serious barier 10 PLN. If it succeeded, the next resistances are 11,90 and 13,49 PLN (1,5-year high). It seems good that together with incrasing price the volume also jumped. It confirms the buy signal. Howeever, looking at the scale of growth and the proximity of resistance at 10 PLN, we can expect a slowdown in a growth. If the price can be maintained above 9,20 PLN, this will be a positive signal. Bulls still have an andvantage. 

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


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