Summary

The last week brought a continuation of increases in the American government bond yields and crude oil prices. In addition, the politics was again in the spotlight. The populist Five Star Movement can gain power in Italy, in one of the largest economies in the EU. Such a scenario is perceived not only as a threat to this country, but also for the Eurozone. Furthermore, Donald Trump suggested trade negotiations with China may not end in a satisfactory manner. This statement hit mainly on Wall Street. During the whole past week, the NASDAQ declined by 0.7%, while the DJI and the S&P500 went down by 0.5%. In Europe, the French CAC40 rose by 1.3%, the British FTSE250 soared by 1% and the German DAX grew by 0.6%. It is also worth paying attention to the reading of the HICP for the Euroland which stood at 1.2% y/y, in line with the market expectations. The inflationary pressure in the Euroland has remained low, so the process of the European monetary tightening will not probably start in the near future. Meanwhile, there have been many indications that FOMC will raise the cost of Money in the US in June.

In the era of increased political risk, rising American government bond yields and crude oil prices, emerging markets have been under pressure. In fact, Poland should be still classified to this group. Lately, the Polish zloty depreciated noticeable and the market sentiment on the Polish stock market was quite bearish. During the last five trading days, the WIG20 fell by 4.3%, the mWIG40 went down by 2.4% and the sWIG80 deteriorated by 0.3%. The market was dominated by bears, despite a very robust reading of the GDP growth rate for the first quarter of 2018. The result at +5.1% y/y exceeded the market projection (+4.8% y/y). The April dynamics of the employment (+3.7% y/y) and wages (+7.8% y/y) did not fail as well. Moreover, the MPC kept the interest rates unchanged. Adam Glapinski suggested the policy of the interest rates stabilization may be continued even by 2020. This has been quite good news for the Polish stock market, however, in case of a market dependent on the foreign capital, the global factors are the most important investment arguments for the investors.

This week, it is worth paying attention to the numerous macroeconomic data readings. There will be publications of the initial PMIs for the Euroland and the US. In Poland, there will be the releases of the dynamics of the manufacturing production and the retail sales. Attention should be also paid to the minutes from the last meetings of the FOMC and the ECB Governing Council. This week, the financial results for the first quarter of 2018 will be presented by PKO, Selvita, Wirtualna Polska, PGNiG, Bogdanka, or CD Projekt, among others.

Technical analysis

Graph 1: WIG20 daily. Source: Stooq

Last week, the index of the largest Polish companies was definitely dominated by the red color. As a result, the WIG20 ended the Friday’s trading session at 2,230 pts. Attention should be paid to the increased volume of trade which confirmed the strength of bears. The RSI oscillator remained neutral. Thus it seemed, the technical pattern has been taking the form of a consolidation with limitations around 2,200 pts. and 2,350 pts.

Graph 2: Dino Polska daily. Source: Stooq

This time we chose Dino Polska as a company of the week. During the last five trading days, the share price of this entity rose by 14.8% - it was the effect of the financial results publication. The financial performance of the company significantly exceeded market expectations in the first quarter of 2018. The stock price of the dynamic growing supermarket chain has been in an upward trend since the IPO of the company. After all, it is worth paying attention to the overbought technical oscillators and high values of multiplies which suggest the valuation of Dino Polska is too demanding. On the other hand, very solid fundaments and favorable market sentiment over the company may protect its share price against remarkable falls, as it has been so far.

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

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