20-03-2017

Weekly comment MM Prime TFI - March 20, 2017

Summary


The last week brought a lot of very interesting economic events. The FOMC was in the spotlight. In line with the market consensus, the council raised interest rates by 25 basis points. The public appearance of Janet Yellen was definitely pro – restrictive, however, some investors expected a much more hawkish attitude of the Fed’s president. Thus, all indicated that the FOMC would raise the cost of money two more times in 2017. Nonetheless, the council’s projections did not take account of the potential stimulus package announced by Donald Trump. Its potential implementation may encourage Fed to further hawkish decisions. Meanwhile, there were another reports that ECB may raise interest rates before the end of QE. The head of the National Bank of Austria publicly endorsed this idea. As a result, the market sentiment once again started to support euro. Moreover, investors focused on the elections in Netherlands. Despite the market’s fears, the eurosceptic Party for Freedom took second place, thereby obtaining a much worse result than expected. It was quite good news for the market, especially in the context of the upcoming elections in France and Germany. Therefore, major global stock market indices ended last week in positive territory. During the whole week, the NASDAQ rose by 0.7%, the S&P500 soared by 0.2% and the DJI increased by 0.1%. In Europe, German DAX grew by 1.1%, while British FTSE250 and French CAC40 went up by 0.7%.

The past week proved to be very successful for the investors at Ksiazeca. During the whole week, the WIG20 rose by 4.4%, the mWIG40 increased by 2.6% and the sWIG80 took off by 1.6%. Special attention should be paid to the latest macroeconomic data releases. The wages growth rate stood at 4% y/y. In addition, the CPI once again exceeded market projections – 2.2% vs 2.1%. However, the dynamics of the retail sales and the manufacturing production amounted to 7.3% y/y and 1.2% y/y. The results were significantly lower than expectations. Investors also learnt many financial statements of companies listed on the WSE. KGHM made a large loss in 2016, whereas this was a consequence of previously signaled write – offs. On the other hand, PKN Orlen made the highest profit in its history.

In the current week, there will be public appearances of Janet Yellen and Donald Trump. In addition, investors will focus on the latest macroeconomic data, especially on the PMIs for the US and the Euroland. In Poland, there will be releases of the unemployment rate and the minutes from the last meeting of the MPC. Furthermore, many companies listed on the WSE will publish their financial statements, among others, Synthos, Ciech, GTC, Budimex and Ursus.


Technical analysis




Graph 1: WIG20 daily. Source: Stooq

The rally of the blue – chip index was in full swing, so at the end of Friday’s trading session its value stood at 2,296 pts.. A double top pattern was not realized and the index successfully defended support level at 2,200 pts. Moreover, the RSI oscillator remained neutral, so it is possible that the market will test the resistance level at 2,300 pts.. A potential breakthrough will be a signal for further increases towards 2,400 pts.. Thus, there have been many indications that a long – awaited correction took the form of a short – term consolidation.



Graph 2: PKP Cargo daily. Source: Stooq

This time PKP Cargo deserved the company of the week name. During the last five trading sessions, the share price of the company grew by 15.5%. The stock price reached a low peak in May 2016. Subsequently, it started an upward trend. The increases were stopped around PLN 60. Last week, the company published its financial results for fourth quarter of 2016. They significantly exceeded market expectations. The release turned out to be an important incentive to further movements towards north. Thus, the share price broke the local peaks. The nearest resistance level stands at PLN 70.

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


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