Page 18 - Poland Outlook 2020

general good environment for CEE helped the high beta currency to gain ground versus the EUR.
That being said, PLN might be currently trading on the strong side and that Q1 will be more difficult given a cyclical moderation in 2020. The expected slowdown is already visible in the industrial sector, as well as consumption is depicting some signs of moderation. This picture is very much in line with our global scenario, which should lead to lower prices for risky assets and the local exchange rate in 2020.
According to ING, there are two structural factors that could keep PLN slightly undervalued over the coming quarters. First, the impact of CHF loans – this was watered down recently, but still exists (see “Banks” above).
Secondly, Commerzbank is planning to sell its controlling stake in Polish mBank. A state-governed institution may place a bid, which would involve converting about PLN 15bn (€3.5bn) into a hard currency in the near future.
“In the short term, better EM sentiment and possible upside risk for €/US$ should mitigate the abovementioned PLN-negative factors. Therefore €/PLN should trade within a 4.25 and 4.35 range for the remainder of 2019 and likely close to 4.35 in 2020, in our view. This means a lasting undervaluation, as our models indicate fundamental (both short and long term) levels at 4.20-25. If weaker PLN prevails, it is likely to be welcomed by central bank. The MPC is not only focused on the CPI target but also GDP growth,” ING wrote.
“PLN FX, finally, could weigh somewhat on the expected returns. The latter is a regional phenomenon which Poland has in common with CZ and HU where the cyclical slowdown in economic activity should weigh on CE FX rates,” it added.
• Stocks
2019 was the third year in a row when more companies left the Warsaw Stock Exchange than debuted on it. In number terms, only seven companies carried out IPOs last year versus as many as 23 withdrawing.
That, according to analysts, points to evident weakness, where low valuations are incentive to buy stock and delist rather than engage in IPOs.
That does not mean there will not be new interesting companies on the stock exchange in 2020 although most of the expected debuts will be on the alternative trading market knowns as NewConnect rather than on the main trading platform. Of the expected NewConnect debuts, many companies will hail from the gaming industry, looking to follow in the footsteps of CD ProjectRed, the company behind the hugely successful Witcher series. CF Project Red is currently valued at whooping PLN 27bn (€6.4bn), the fifth most valuable company listed in Warsaw.
Other companies looking to debut on the NewConnect market this year hail from as diverse industries as genetics and e-mobility.
A factor to watch on the WSE in 2020 could the impact of the so-called Employee Capital Plans (PKK), a new voluntary savings scheme for employees with a purpose to create long-term savings. Employers will
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