New record lows
The stock market fell to new depths not seen in the past two and a half years as fears of the budget deficit and a possible currency crisis persuaded investors to cut and run.
The WIG index fell yesterday to 13,195.6, down 1.7 percent whilst the WIG20 was even worse hit, down 2.3 percent to 1,176.3. The worst of all was felt by technical stock, the index of which fell to its lowest point ever at 689.3 points.
Clearly the biggest problem is the budget. The state now recognises that the deficit this year will be around PLN17bn, far higher than the PLN7.5bn originally expected. It is likely to seek the plug this gap with bonds which will be very welcome to investors seeking a safe haven. Issuing new bonds is also a safer option for MPs who may be reporting to the unemployment benefit office after the September elections, public spending cuts would be a more certain route to losing votes.
However there is also now the risk of a currency crisis as the PLN has fallen by around ten percent in recent days and many companies owe a lot abroad where they were able to pick up credit much cheaper than here in Poland where interest rates have been at least double the rate of inflation this year. One of the companies that could be threatened by currency problems is Elektrim which has a debt of nearly USD1bn, much of it in foreign currency. To make matters worse there are arguments about who should sit on its board and its stock fell by nine percent to PLN20.20 yesterday, making its losses for the week 14 percent.
Turnover on the bourse was PLN206.5m, 24 companies went up on the day and 70 went down. Today is not promising anything better.