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Pioneer Pekao says outlook positive, Advisory and Opinions - EquitiesPoland.pl
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Advisory article

Pioneer Pekao says outlook positive

Polish investment fund manager Pioneer Pekao sounds bullish on equities on a conviction that the crisis has passed and that any eventual tapering of QE will provide a shorter-term buying opportunity in a longer term bull run.- I think that the worst has passed and the crisis seems to be winding down, Fund manager Peter Bodis told a press briefing.

Bodis says end-2013/beginning 2014 looks hot for equity and any weakness thereafter is only market turbulence on a shifting picture for global monetary policy. Expect European equities to outperform US equities as the former have more earnings power to regain.

 

Following are highlight quotes from the chat with Bodis:

ECONOMIC OUTLOOK

- We are gradually returning to normalcy and each consecutive quarter should look better. All factors that had burdened the global economy are slowly dying out. Of course, this doesn`t mean that we can`t have local turbulence. We still have the problem of Greece, Spain and even Italy. But they aren`t systemic problems like the real estate bubble in the US.

 

- I think that growth on the market in Q4 will be synchronized and more dynamic. By synchronized I mean that various markets should gain. And that is a healthy situation.

 

TAPER / QE / GLOBAL RATES

- I think that limiting the program of asset buying by the FED would be positive information in a broad context. such a decision would mean that the market is returning to normality, that the American economy is coming out of the recession. Of course, in the short term, there would be certain moves on markets, but the overall picture of the market would improve.

A considerably more significant than the end of QE will be when central banks start hiking interest rates. Of course, although it will be tied to turbulence on equity and bond markets, in the long term, it will also testify that some economies are returning to normal. And that can only be read positively.

 

EQUITY & DEBT OUTLOOK

- I think that the second half of this year and the first half of 2014 will be good for equity markets. The second half of 2014 and beginning of 2015 could get hit by speculation ahead of FED rate hikes. That could leave sentiment in not the best of shape. Nonetheless, we should then have a return to gains. That should make the second half of 2014 a good time for buying low.

 

The market consensus assumes that the US markets could gain about 20%. but you need to remember that profits generated by American firms in the crisis didn`t fall as much as and are now at record levels. In Europe, in turn, profits fell clearly and we still have a lot of upside potential. That suggests that European stock prices will rise faster than in the US.

In terms of Polish shares, I also see growth potential, albeit somewhat less than in the west. The WSE will suffer the changes in OFE, but that could be offset by increased appetite from abroad.

Aside from equity, it will be worth taking note of the corporate bond market. in the recovery, firms will have better cash flow and debt servicing capacity.

2013-09-29



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