Analyzing the charts of the major US, European, and Asian indices one can a notice plenty of similarities. World economies followed America, which was experiencing a decline to rebound on Wednesday. At the beginning of the week macroeconomic reports published in the US did not put investors in a good mood. On Monday, the US National Association of Realtors reported that sales of existing homes in the US declined by 0.2% to 5.75 million on a month-to-month basis. The reading matches analysts’ expectations. On a yearly basis, existing home sales declined to 9.0% while analysts expected a decrease of 9.8%. In the minutes from the Fed’s meeting released on Tuesday, the Fed acknowledged that "further deterioration in financial conditions could not be ruled out". Such deterioration might require “a policy response” if growth of the American economy will be endangered. We have already experienced a Fed intervention, when on August 17th it pumped billions of dollars into the banking system to help its liquidity. On Wednesday markets rebounded on declining risk aversion of investors

The Dow Jones Industrial Average, which started the week at 13,386, declined to 13,034 on Wednesday to rebound to 13,293. The S&P 500, a broader measure of US stocks, after dropping to 1,431.2 on Wednesday, bounced back to 1,466.3. Global markets responded to news from the US. Japan’s Nikkei 225 declined to 15,815 on worse outlook of the US economy. The US is Asia’s biggest exporter. Information that the US economy is growing the fastest in more than a year made Japanese companies more attractive to investors causing the Japanese benchmark index to rebound to 16,555. European stocks behaved in a very similar way. Germany’s DAX fell to 7,354 on Wednesday to bounce back all the way to 7,569. The FTSE 100, UK’ benchmark index, ended the week at 6,252 while on Wednesday it was still quoted at 6,062.

The global turmoil is obviously affecting the Warsaw Stock Exchange (WSE). Increasing global risk aversion casued investors to take their money out of risky investments. Poland, as an emerging market, threatens investors with higher volatility. The sell-out of equities on the WSE started on Monday and continued till Wednesday. During this period the Polish benchamark index, the WIG 20, declined from 3,630 to 3,466. The market rebounded but then came Thursday, which brought sensational news. The Polish Internal Security Agency arrested former Minister of Internal Affairs, Janusz Kaczmarek, PZU’s (Polish largest insurance company) CEO Jaromir Netzl, and former National Chief of Police Konrad Kornatowski. At the same time, news broke that the Attorney General wants to question Ryszard Krauze, one of the wealthiest people in Poland. The arrests are related to the leaking of information to the Ministry of Agriculture and corruption. After the information was made public, companies controlled by the businessman started losing ground very quickly. Prokom, the software company, lost 6.1% while Asseco, controlled by Prokom, declined the same 6.1%. Bioton lost 10.2%, Polnord 11.4%, and Pol-Aqua 7.3%. On Friday the market stabilized after representatives of the mentioned companies assured that their economic outlook will not be disturbed by the geopolitical crisis.

On Thursday, August 30, the Warsaw Stock Exchange launched New Connect – an organized and controlled by the WSE market that designed to finance the development of young and small companies with high growth potential. On the first session, five small businesses debuted: Digital Avenue, S4E, ViaGuara, Virtual Vision and Wrocławski Dom Maklerski (WDM). During the first day, investors placed 11,240 orders, made 5,271 transactions and volume reached zł.34,171,354. All companies listed gained during the first day. The capitalization of the new market, after the first session, reached zł.675,856,943. New Connect is new offer of the WSE for investors accepting higher risks and expecting higher returns. The new market was created for young, dynamic companies, which hope that money derived from the offering will help them to grow. The goal for those companies is to expand and join the main market of the WSE in the near future.

Adam Narczewski