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The Warsaw Voice » Business » November 12, 2008
Month in Review
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Panic Sets In
November 12, 2008 By Michal Jeziorski   
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One word sums up the past month on the Warsaw Stock Exchange-panic. In October the market's WIG20 blue-chip index lost more than 10 percent after plunging for three weeks in a row.

That gives the best idea of the scale of the problem. At the end of the month the WIG20 was more than 60 percent lower than a year earlier when it was breaking all records.

The latest bearish trend is in many ways similar to that recorded after the dot-com bubble burst in 2000-with one major difference: back then the stock exchange took 19 months to plunge this low; this time a year was enough.

The Warsaw Stock Exchange remained in the grasp of foreign investors as they dumped shares throughout October. Global investors fled not only Poland but the whole region. This means the Polish market is largely paying for someone else's mistakes.

Stock market optimists say the pendulum cannot keep swinging just one way. However, in recent weeks the most pessimistic forecasts have turned out to be the most realistic.

In this situation, investors switched their attention to futures contracts. The Oct. 30 session saw a record daily volume of contracts tied to currency exchange rates-3,123 contracts changed hands in all. Since the start of the year, a total of 95,296 futures contracts tied to currency exchange rates have been traded, a 15-fold increase over last year, when only 6,101 such contracts were traded.

Compared with last year, the situation is also much worse in terms of the number of new listings. Since the start of this year only 26 companies have entered the WSE's main market. Despite this, the Treasury ministry is confident about the success of an impending debut by Enea, a supplier of electricity to northwestern Poland and the owner of Poland's second-largest power plant at Kozienice.

There are 149.2 million Enea shares up for grabs, accounting for just over 30 percent of the company's share capital. If Enea manages to sell all the shares, the Treasury's stake in the company will shrink to 60.8 percent, while employee ownership will decrease to 8.5 percent.

Meanwhile, the WSE is making changes to its NewConnect alternative market to limit issue-price fluctuations for new listings. In the past, there were cases when prices changed by several hundred percent, especially when turnover was low, which may have created room for manipulation. The Financial Supervision Authority has asked prosecutors to investigate three cases of suspected manipulation. The record NewConnect debut fluctuations were those of Virtual Vision, which gained a staggering 1,875 percent on opening day.

As of Nov. 11 new companies hitting NewConnect will only be traded from 11 a.m. on opening day to ensure a situation in which the opening price will be based on a larger number of orders and a greater volume of transactions.
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