Poland's benchmark equity index, the WIG20, has experienced a substantial rally, outperforming both US stocks and major European markets since June. Over the past two months, the WIG20 has jumped 15%, hitting a record high, while the S&P 500 saw a 2.9% gain, the Stoxx Europe 600 advanced 1%, and the MSCI Emerging Market Index remained largely unchanged. This strong performance is attributed to foreign investors being drawn by improving corporate earnings and Poland's robust $1 trillion economy, which is experiencing a buzz around its companies due to new products, surging sales, and plans for public share offerings.
The Polish market's overall growth has been impressive, with the WIG20 gaining 30% since the start of the year, half of which occurred in the last two months. This surge reflects growing confidence in Poland's economic resilience and corporate profitability, attracting increased capital. Energy companies like PGE and Orlen, as well as retailers such as Dino Polska and Allegro.eu, have seen profit increases, benefiting from a consumer sector boom. This performance has led S&P Dow Jones Indices to plan reclassifying the Polish market from emerging to developed next year.
Despite the significant rise in stock prices over the past four years, some analysts suggest that high earnings keep the price-to-earnings ratios moderate, preventing stocks from appearing excessively expensive. For instance, Poland's largest financial and insurance company, Powszechny Zakład Ubezpieczeń, gained over 14% this year, with analysts recommending buying or holding its stock. However, a single-source report suggesting a potential 25 basis point rate hike by the National Bank of Poland after November, due to strong GDP growth and rising inflation, could impact the banking sector, which has rallied based on expectations of further rate cuts. This creates a potential mismatch for the WIG-BANKI index and the broader WIG20.
