Lower and lower
The stock market yesterday hit its lowest point since December 1998 with the WIG20 dropping 1.6 percent to 1,102.1 points and analysts are now predicting further deep cuts.
The way down yesterday was led by KGHM which lost 7.8 percent. The market has a low opinion of KGHM due to the low price of copper on world markets, strong arm tactics by trade unions and the company’s involvement with Telefonia Lokalna which like all telecoms companies is not doing as well as it might be.
A good example of the lack of telephone success at the moment is TPSA and Netia. Yesterday they both hit all time record lows falling by 5.4 percent and 8.8 percent respectively. In the first case investors are worried about government owned shares swamping the market. In the second case they are worried about bailiffs swamping the company.
The stock market is now dangerously close to hitting the psychological low of 1,100 points with some now forecasting a fall to three figures by the autumn.
Foreign investors are likely to start to rethink the very idea of putting money into this country. With next year's budget deficit potentially greater than PLN36bn players from abroad are likely to take a somewhat negative attitude to Poland, particularly when this means high interest rates. Thus the vicious circle continues: high government borrowing =high interest rates = low growth = government revenues lower than planned = high government borrowing etc etc etc.
The sale of such companies such as Elektrim, PZU, TPSA and PKN Orlen is effected by the low price at which the stock is now being traded. In the latter three cases current weak stock market performance means that the government can raise a lot less cash than planned through the privatisation of shares it holds