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The Warsaw Voice » Business » February 6, 2008
Warsaw Stock Exchange
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MONTH IN REVIEW: No January Effect
February 6, 2008 By Michal Jeziorski   
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The year started on a bad note for the Warsaw Stock Exchange: all the indexes plummeted and the usual "January effect" failed to materialize.

January is usually when investment funds are busier than ever. Having closed the previous year, they are able to make more aggressive investments on the stock market. But these days investors around the world are hardly interested in stock due to fears of a recession in the United States. The Nasdaq index shed 9.9 percent in January, in what was its greatest drop since 1971 when it was established.

On the Warsaw trading floor, individual investors and investment fund managers who had been investing in small and medium-sized enterprises for years, were particularly nervous. Investment fund companies had set up many funds specializing in SME stock. As long as the market was bullish these funds offered some of the highest gains on the market and continued to attract investors. At the peak of their popularity last spring they managed zl.13 billion worth of assets. But for half a year now these funds have been recording losses. In the past three months, leading SME funds lost around 20 percent. In previous years, they had been able to generate annual gains of up to 100 percent for their investors. At the end of June 2007, the mWIG40 medium-sized company index climbed to an all-time high, but has already lost 40 percent since then.

The stock market slump is bound to affect 13 million prospective pensioners in Poland. The country's open-ended pension funds are expected to begin paying out their first pensions next year, and these payments will largely depend on what happens on the stock market. The Analizy Online service said in late November that pension funds used to invest in stock as much as zl.35 for every zl.100 contributed by future pensioners. They invested a total of zl.49 billion on the stock market, and mutual funds invested a further zl.56 billion.

The largest players on the WSE have lost hundreds of millions of zlotys. The largest private investor here is Leszek Czarnecki. At the end of 2007, his stock portfolio was worth zl.9.6 billion, but since that time it has dwindled by more than zl.700 million. Among those hardest hit are those who invested their money at the peak of the bull market last year, especially if they chose equity funds. They have lost up to 20-30 percent, and will hardly find it easy to make up for these losses anytime soon.
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