Polish markets cheer after election flags major political shift
Reuters
Published Oct 16, 2023 08:31
Updated Oct 16, 2023 10:40
(.)
LONDON (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 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, strongest since late August. The currency was trading at 4.4714 by 0815 GMT
+ Hard-currency bond spreads tighten to 125 bps
+ 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
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, CONOTOXIA, 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."
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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."
Written By: Reuters
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