Warsaw Stock Exchange hit by slump

The new year has been anything but happy for Polish investors. The Warsaw Stock Exchange has been hit by the worst plunge in two years. During the last two weeks, shares have fallen by 15 percent on average.

WIG index, the most important indicator for all Warsaw shares, fell from 55,521 on Jan. 2 to 46,204 on Jan. 16, which for most investors became known as Black Wednesday.
After stocks went slightly up on Thursday and Friday, the plunge continued after a weekend break. On Monday, WIG fell to 44,509, causing more panic among share owners.

The Warsaw exchange is following a worldwide down trend, even though the Polish economy is in good condition, especially when compared to the U.S.. Poland’s economic growth forecast for 2008 is 5.5 to 6 percent, while the U.S. prediction is just 1.8 percent. But last week’s pessimistic statement by U.S. Fed chief Ben Bernanke on the state of the American economy also influenced investors’ expectations in Poland.

The January slump closed a period of growth on WSE from May of 2003, when the WIG was around the 15,000 level.
Those who began investing then or even during the last two years are mostly still on the plus side.

The main casualties of the stock decline are the newcomers who put their money into mutual funds in the last 12 months. They have already lost much of their funds in 2008 and have started panic money withdrawals in some cases. According to the daily newspaper Gazeta Wyborcza, 5 bln zloty of the 145 bln in Polish mutual funds has been withdrawn.

Most experts say that it’s far too late now to be selling shares that already have lost much of their value. Their advice is rather to wait it out until the stock exchange begins to rebound. But even they are unsure when that will happen.
Most market consultants now expect the stock charts to flatten for more than half the year. The end of 2008 should see the WIG growing again, they say.

This forecast, however, could be adversely affected by international markets, mainly by the New York Dow Jones if the U.S. should head into a long-time economic recession.
Deputy Prime Minister and Minister of Economy Waldemar Pawlak has appealed to investors to remain calm and has tried to assure them that the Polish economy is not threatened by other stock exchanges around the world.

Pawlak also has pointed to the high level of foreign investment and the internal demand in Poland.

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