Summary

Once again we are witnessing an interesting disproportion of forces - the Warsaw Stock Exchange is much stronger than their western competitors. Great leaders are the members of WIG20 index, which grew by 2.2%, closing the week at 2519 points. With such dynamic, an increases to 2560 points (September peak) can be within current index strength. Indices of medium and small companies were weaker - mWIG40 grew by 1.1% and sWIG80 by 1.7%. PKN Orlen was a driving force of the WSE . On the wave of good quarterly results and still favorable macro Polish petrochemical giant grew by 10.8%. Also banks performed well, WIG BANKI subindex grew by 1.3%. While in the case of Orlen solid foundations were one of the reasons for buyers, in case of banks, demand was driven mainly because of inflow of foreign capital into the Polish market. It’s easy to notice that cheap capital is now looking for interesting investment alternatives, and the Warsaw Stock Exchange is the largest stock exchange in the region. Due to the economic crisis in Russia, WSE can be considered as the largest stock exchange in the whole Eastern Europe. The WSE grew also after the strong readings of retail sales and industrial production for March. However if you take a closer look at them, you could notice so one-off events.

On the major stock exchanges in Europe increases were much smaller and could be explained as sort of a rebound from previous strong declines. The DAX gained 1.0%, and the CAC40 went up by 1.1%. PMI for the services sector and industry, and concerns about the solution to the situation in Greece were considered as a potential reasons for the weaker behavior of European indices. On the other hand by looking at the growing Eurodollar it is more likely that market is not that worried by the Greece situation. Probably it is the period when European exchanges have to correct a bit as some of them gained more than 20% since the beginning of the year.

After the standstill period indices on Wall Street are returning on grown path. The S&P500 appreciating by 1.8%, tapped into their record levels at 2120 points, while the DJIA with an increase of 1.4% is still somewhat lacking points to break the record. While the NASDAQ technology has definitely set a new historic peak at 5100 points, ending the week by as much as 3.2% up. Drivers for growths were on one hand the results of companies that beat the consensus established low, on the other hand, a little paradoxically, weaker data coming from the US economy. However, if you look at the calendar, the puzzle is solved. On Wednesday, the FOMC will announce a decision with regard to interest rates and the market plays for mildly toned comment. Investors should pay attention to the Chicago PMI index and the ISM for the US industry, preliminary data on US GDP for the first quarter and inflation in the euro zone for April.

Technical Analysis

Graph 1. WIG20 daily. Source: Stooq

WIG20 last week continued to move up, gaining 2.2%, closing the week on 2519 points. The short term trend is very clear and fast, which raises concerns about some major adjustments. Volumes do not have an upward trend anymore. Strong resistance from a maximum of September 2014. at 2560 points is seen on the horizon. The support is at 2476 points. The chances of an attack on the above level are realistic, however they can be hard after such a recent big increase in the index. A more realistic scenario seems to be a correction move below 2500 points. Important level to defend is 2476 points.

Graph 2. Kruk daily. Source: Stooq

Last week the upward trend continued on Kruk shares. Over the last 5 trading days price raised by 6.4%, setting a new record high of 157.90 PLN. Kruk is in upward trend for many years, and the current growth wave has been marked on the graph line. The appreciation has accelerated since the beginning of the year, and the distance from the current trend line is already significant. In addition lower turnover may suggest that high growth potential may be finishing. There seems to be two sscenarios - longer stop at 160 PLN or fast downward correction, which will support the previously stamped peak of 138.90 PLN.

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

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