The Polish market has had a n indifferent year with performance varying along with the rise and fall...
The Polish market has had a n indifferent year with performance varying along with the rise and fall in technology stocks.
"Poland is a mixed story," says Isabelle Knight, fund manager at Credit Suisse. "The first quarter was strong, driven by tech, media and telecom stocks but as interest in these sectors fell away, around March and April, the market has been weak."
Peter Grace, investment manager at Gartmore, agrees the Polish market is weak at the moment with large supplies of equity waiting to come onto the market.
For example, telecom company TPSA, which has a virtual monopoly on the market, has had to issue shares for employees following the end of its lock-in period, while Bank Pekao is also raising capital as it is obliged to under its privatisation agreement with the government, he says.
Suresh Sadasivan, emerging markets analyst at Old Mutual, says: "It is difficult to find great value relative to other markets. I do not see an exciting coming 12 months." The group has moved underweight in the region.
Joanne Irvine, fund manager at Aberdeen, is more positive on the region and says the Aberdeen Frontier Markets Fund has recently moved from a neutral to an overweight position in Polish stocks. It has a weighting of 6.4% in the country compared to its benchmark weighting of 4%.
Grace observes the Polish government has unrealistic expectations of the money to be raised from the auctions for third generation mobile telephone licences.
The government is expecting to realise $2.5bn whereas around half of that would be fair value, says Grace. The telecom operators will then have to raise money to pay for the licences, which will lead to further issues on the market, he adds.
Fund managers remain concerned about Poland's poor macroeconomic performance.
Grace says that while consumer demand in Poland is strong, some reassurance is needed that the country's current account deficit will be kept under control.
He says there is also uncertainty as to how the government will fund the level of imports when the money created through privatisation dries up. "In the long term, Poland needs to find sources of foreign investment to sustain the capital account when there is a current account deficit or else exports have to develop more strongly.
"As exports will not keep up with imports for quite a while, Poland is likely to have a current account deficit for the next decade," says Grace.
Fund managers tend to have holdings in Polish telecom and financial stocks and occasionally in oil companies. Gartmore has holdings in TPSA which is benefiting from the slow but continuous process of deregulation.
Gartmore and Aberdeen both have holdings in Electrim, primarily a cellular phone operation which is in the process of a takeover battle between Deutsche Telecom and Vivendi.
Aberdeen has holdings in Bank Pekao, the largest retail bank in Poland, in which Unicredito, with one of the best reputations in Europe for high quality management and experience in restructuring, took a strategic position last year.
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