Analyst View: Polish markets cheer after election flags major political shift

Safi Silver

16/10/2023 09:28

(adds four analyst comments at the top)
       LONDON, Oct 16 (Reuters) - 
    Poland's ruling nationalists appeared on Monday to have lost
their parliamentary majority in the nation's most pivotal
election in decades, raising the possibility of a huge political
shift that cheered Polish financial markets.
        Below the latest market and analyst reaction to the
election:
  
    
+ Poland's blue chip index WIG20  .WIG20  jumped nearly 5% to
hit a two-month high before trimming some gains to trade up 3.6%
+ Banks and energy sectors were the biggest gainers, up 3.8% and
5.4% respectively  
+ Zloty strengthened as much as 1.8% to 4.4434 to the euro
 EURPLN= , strongest since late August. The currency was trading
at 4.4714 by 0815 GMT
+ Hard-currency bond spreads tighten to 125 bps  .JPMEGDPOLR    
 
+ The yield on Poland's 10-year domestic government bond stood
at 5.656% after hitting a one-month high of 5.613% in early
trade  PL10YT=RR      
    
        PAUL DONOVAN, UBS GLOBAL WEALTH MANAGEMENT, UNITED
KINGDOM
  
        "Exit polls from Poland’s general election suggest
pro-EU opposition parties will have sufficient seats to form the
next government. The final result may not be known until
tomorrow."
  
        "If polls reflect reality, this removes a potential
source of financial markets' uncertainty, reducing the risk of
further division in the EU. Other divisions remain in place."
  
        
  
        LEE HARDMAN, MUFG, UNITED KINGDOM
  
        "The ousting of the nationalists will help to restore
damaged relations with the EU." 
  
        "The zloty should continue to strengthen further in the
near-term in anticipation of improving relations with the EU
that will help to support growth and attract capital inflows." 
  
        
  
        BARTOSZ SAWICKI, CONTOXIA, POLAND
  
        "The outcome is the best-case scenario for the zloty,
yet medium-term challenges remain. Deeply negative real interest
rates will not disappear overnight, and inflation could be
sticky next year. Although a gradual drift towards a slightly
more restrictive fiscal policy can be expected, high borrowing
needs will also stay in place."
  
        "The initial market reaction, which was clearly
positive, could fade if the political uncertainty persists. The
handover of power could take up to two months, as the United
Right is believed to be trying to form a government, although
these efforts appear to be doomed."
  
        
  
        ERIC MEYERSSON, SEB, SWEDEN
  
        "An opposition government is now the most likely
outcome, albeit ridden with uncertainty based on the final
election results as well as some institutional and political
risks."
  
        "Poland under an opposition, more pro-European
government should markedly increase the probability of it
receiving the EU funds previously withheld, although this may
take some time. We also see an increased probability of changes
to the leadership of the central bank of Poland, likely
ultimately leading to a somewhat more hawkish stance."
  
    
    FRANTISEK TABORSKY, ING, UNITED KINGDOM:
    "Exit polls after Sunday's general election indicate a
victory for the ruling party, but a majority for the opposition
parties. The prime minister has indicated an interest in trying
to reassemble the government, but unless the early results
change fundamentally, we can expect a change in Poland's
leadership."
    "We can expect the market to maintain the positive
sentiment, which should be positive for Polish assets in
general. For now, we see the key level of EUR/PLN 4.450, which
will have to be broken on the way down."
    
    OLLE HOLMGREN, SEB, SWEDEN
    "A more definitive election result will not be presented
until this evening, or maybe even tomorrow, and the current
ruling party, Law and Justice, will be the largest party and
will thus have the first opportunity to try to form a
government. Even if the opposition becomes the largest, it can
take a long time to unite all parties on a common policy."
    "Poland has hosted over 1.5 million Ukrainian refugees, and
it serves as the main hub for the transfer of arms and aid to
Kiev. The zloty has been one of the better performing emerging
market currencies against the euro over the past month, partly
due to expectations of a political change. If the results of the
polling station survey are confirmed, the currency should
continue to strengthen."
    
    LUKASZ JANCZAK, ERSTE GROUP, POLAND
    "The first reaction of the wider market will also be
positive. This is indicated by the currency market, where the
Polish zloty is strengthening, and it seems that what the
investors may assume (...) is that the potential government of
the former opposition will have a more open attitude towards the
EU. They can expect an unfreezing of National Reconstruction
Plan funds, and improvement of corporate governance."
    
    MICHAL KOZAK, TRIGON, POLAND
    "Probably the opposition's victory and perspective of
forming government in the next few weeks would be very positive
news for Orlen. We expect fuel wholesale and retail prices to
rebound, which can continue to occur until information of the
government's formation. Looking at the medium term, Orlen's
shares may rerate, as an effect of the lowering of political
risk."     

 (Reporting by markets team in Warsaw, Gdynia and London,
compiled by Karin Strohecker; Editing by Amanda Cooper and
Gareth Jones)
 ((karin.strohecker@thomsonreuters.com; +442075427262; Reuters
Messaging: karin.strohecker.reuters.com@reuters.net))