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Polish fund managers bet on Financials, turn bearish on Telecom and Utilities, Advisory and Opinions - EquitiesPoland.pl
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Advisory article

Polish fund managers bet on Financials, turn bearish on Telecom and Utilities

FUND MANAGER SURVEY - Polish-based fund managers went radical on cyclical sector preferences in place largely since March, issuing some all-time top readings for Financials just as banks roll out above-consensus Q2 earnings and turning strongly bearish for defensives Telecom and Utilities, the August 2013 PAP Market Insider Poland Fund Manager Survey has shown.

The broad rule for August: the strong got stronger and the weak got weaker.

 

FINANCIALS: The panel issued the all-time strongest composite indicator reading for Financials on a notable m/m jump from what had already been a strong reading since the March survey. Everybody calls this a likely outperformer over the coming periods, and faith in the earnings outlook - the laggard element of the story for banks - finally started to fall in line with market views just as a smattering of top Polish banks proved their resilience to falling interest rates in Q2 reports. Worth noting - Financials has long been, and remains, the panel`s most consistent and notable overweight.

For Wood & Co. equity strategist Mateusz Zawada, the preference for Financials is - no wonder since the sector is characterised by a high beta and may grow faster than the broader market -, he commented for PAP.  - Q2 results have shown that this year`s forecasts may be too pessimistic -  he said.  It seems that fund managers were more optimistic towards Financials and the strategy has so far paid off. -

 

INDUSTRIALS: The composite indicator rose marginally from the prior month reading and remains within a range in place since the key March survey. Market performance forecasts are the strongest element of outlook, although, unfortunately, our survey does not distinguish between producers of capital goods and construction firms within the Industrials segment.

- Positive signals from leading indicators allow for an optimistic approach to Industrials, Zawada commented referring to the recent PMI readings, adding: New orders are growing, inventories are falling and readiness to hire more employees is increasing. All this makes for good prospects for this sector in the following quarters.

TELECOM: The composite indicator - weak since March - fell to near record lows in August on a notable monthly decline. The decline was focused on 12M market outlook and the earnings outlook, immediately calling to mind the downbeat tone from the Q2 earnings presentation of listed incumbent TPSA. Some 2/3 of the panel is already underweight and sellers remain.

UTILITIES: The composite indicator had also declined for the March survey when views turned strongly cyclical, but had enjoyed moments of reprieve for the June and July surveys. The four worst readings on record have come between the March and August surveys.

A growing market does not encourage a positive approach to low-beta defensives such as Telecom or Utilities, the Wood & Co. strategist noted.

But there have been sectors to break that general pattern and constitute exceptions to the rule that the March survey`s move towards cyclical views held and was extended in August: defensive IT suffered in the March move, but drifted back into mostly neutral territory since as it draws few strong opinions. Materials had surged in the March survey but has lost that luster for most of the interim, presumably as global views to commodities suffered on taper-talk. Locally, that has meant a certain split in views (a smattering of negative views seem to cycle in every other month or so).

Sentiment towards Commodities has been negative of late due to disappointing data from China, Zawada commented.  - In our opinion, it`s time for a more positive view, he said, citing improvement in China`s recent PMI and industrial output data.

Also of note: the discord that had existed between sector holdings and sector earnings views, a discord that had peaked leading up to the March survey, has eased notably. Improved views to earnings in Financials seems to account for a good portion of that. In fact, the August survey is the best that portfolios have matched earnings views since early 2011.

 

 

The August 2013 Fund Manager Survey was conducted between August 1 and 6 on a panel of 12 locally-based fund managers with portfolios captive to the Polish market.

Source: GPW and PAP

2013-08-11



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