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The Warsaw Voice » Business » March 18, 2009
Month in Review
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Stock Market Slide Continues
March 18, 2009 By A.R.    
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Despite hopes, the Warsaw Stock Exchange (WSE) failed to rebound in February. Investors continued to dump shares and the stock market's indices dropped to new lows.

Almost all stock markets in Europe declined in February, but Warsaw was again among those hardest hit. Despite the country's decent economic performance, investors continued to sell the Polish currency and stocks.

The month's worst trading session was on Feb. 17 when many stocks lost more than 10 percent as investors fled Poland on fears that leading European banks with stakes in Central and Eastern European financial institutions would be exposed to further losses.

Investors across Europe dumped bank shares. And because banks usually figure prominently in stock market indices, the markets nose-dived. In Warsaw, Bank Pekao SA was the most affected, losing over 18.6 percent. The WSE's banking subindex, WIG Banki, dropped by more than 16 percent. Other listed companies also plummeted amid low turnover. Investors were mainly selling shares in companies with evidently weak fundamentals, as suggested by recent quarterly reports and disclosures about their losses on currency options. Eventually, the WIG-20 blue-chip index shed 7.5 percent and the WIG all-share index lost 6.65 percent.

The WSE regained some ground during the following sessions, but not enough to recoup investors' losses. The government's promise that it would take determined action to make Poland part of the eurozone, coupled with another cut in central bank rates, did not help.

Analysts say developments on Wall Street will determine whether indices in Warsaw continue to fall in the coming weeks. If the situation in the United States improves, they say, it would send a signal to global stock markets to buy. The best news would be if Central and Eastern European countries received help to deal with the economic crisis. If that happened, investment risk in the region would diminish considerably and foreign investors could return here lured by the prospect of big gains on local stocks and currencies.

According to a recent report, foreign investors were responsible for 43 percent of total equity trading on the WSE last year. Polish institutions and individual investors accounted for 39 and 18 percent respectively. Among foreign brokers, those from Britain, the Czech Republic, Austria and France had the strongest presence, accounting for 72, 11, and 5 percent of the market respectively. Among Polish institutions, investment funds, market makers and pension funds were the largest players, with 38, 19 and 18 percent respectively. Polish individual investors accounted for the biggest chunks of the futures and option markets, at 53 and 58 percent respectively, while Polish financial institutions held 37 percent of the futures market and 30 percent of the option market.
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