As Konrad Ryczko noted on Monday, the beginning of the week on the Warsaw Stock Exchange brought a sudden and strong sell-off of the main index – WIG20 lost 3.2%, reaching 2266 points. mWIG40 fell 3.79%, while sWIG80 recorded a drop of 4.48%. Turnover on the broad market amounted to over PLN 2 billion.
“The first session of the week on global markets began with a kind of panic among investors in Asia. The Kospi (Korean index – PAP) lost about 9.6 percent, and the Nikkei recorded a markdown of about 12.4 percent. In the case of Japan, the sudden changes in the index were explained by the reverse correlation to the valuation of the Japanese yen, which rose to 7-month highs as a result of the reversal of the so-called carry trades based on differences in interest rates,” Ryczko said.
“In a broader context, the sell-off has also spread to Europe and the US. The initial phase of trading in the US brought a drop in the local Nasdaq index by around 6%. Here, the argument concerns the recent weaker data from the US economy, which increases expectations for rate cuts by the Fed (currently around 50bp in September). Additionally, we can talk about local panic, which is illustrated by the fact that some media investors are already calling for an emergency FOMC meeting (Federal Open Market Committee – PAP) and deeper easing,” the analyst added.
He pointed out that the beginning of trading in Warsaw was characterized by a strong drop in company valuations, where trading in a large part of entities outside WIG20 was suspended as a result of violation of the turnover volatility range (static and dynamic). Ultimately, in the main index, PGE (-5.87%), KGHM (-4.9%) and Cyfrowy Polsat (-4.22%) ended with a discount of over 4%.
“From a market perspective, since the last peak at around 2,565 points, WIG20 has already lost almost 13 percent. Initially, the zone of 2,210-2,224 points was defended, but from a technical point of view, the upward trend was violated. The key issue remains the core markets, with particular emphasis on the sentiment on Wall Street,” Ryczko concluded. (PAP)
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