Oct. 14 (Bloomberg) -- Poland’s record $10 billion of state share sales through next year risk draining funds from the stock exchange, causing the market to underperform, according to ING PTE SA, manager of the country’s second-largest pension fund.
Warsaw’s benchmark WIG20 Index has climbed 24 percent in 2009, lagging behind the MSCI Emerging Markets Index’s 67 percent gain and the Hungarian BUX Index’s 70 percent surge. While Poland is the only European Union economy to avoid a recession this year, investors have been setting aside money for initial public offerings, Ewa Radkowska- Swieton, ING PTE’s board member in charge of investment, said in an interview in Warsaw.
“These big offerings will probably drain some funds from the market and prompt some asset reallocations,” said Radkowska, who helps manage the equivalent of $14.3 billion of assets. “It won’t be easy for the Warsaw bourse to catch up with the gains on other markets.”
Poland is offering stakes in power, oil, copper, phone and insurance companies to help plug a budget deficit that the government says will almost double next year. Shares of state- controlled coal producer Lubelski Wegiel Bogdanka SA soared 58 percent since its IPO in June, lifting the company’s valuation to 13.6 times estimated earnings from 9.4 times, according to data compiled by Bloomberg.
PGE SA, Poland’s biggest power producer, said on Oct. 12 it’s seeking to raise about 5 billion zloty ($1.7 billion) in the next two weeks for Europe’s largest IPO this year. State- controlled PKO Bank Polski SA, the country’s No. 1 lender, is selling 5.1 billion zloty of new shares this month to finance expansion. The total 30 billion zloty of share sales planned through 2010 is equivalent to almost 10 percent of the Warsaw Stock Exchange’s traded value, according to Bloomberg data.
PZU, Polkomtel
The sales may cause “temporary shocks on the investors’ side,” said Radkowska.
The government will be under pressure to offer the shares on the stock market at prices that will ensure demand, according to Radkowska. Investors expect a discount of 10 to 20 percent relative to the industry group, she said.
“The government has its back to the wall because it needs to sell assets to keep the public debt in check,” said Radkowska. “These are big, flagship companies and they can’t afford to fail.”
PZU SA, Poland’s biggest insurer, may offer a stake to the public next year after the government struck a deal over control of the company with Dutch-based Eureko BV. Mobile phone operator Polkomtel SA, controlled by state-owned companies, also is considering an IPO as two shareholders seek to sell a total stake of 46 percent.
Power Companies
Poland is targeting a total 36.7 billion zloty from selling assets through 2010, including stake disposals to strategic investors, to help finance a deficit the government estimates will reach 52.2 billion zloty next year.
Power-company shares may be a “good opportunity” for local pension funds to diversify portfolios and a “chance to earn money,” said Radkowska. Of Poland’s four power groups, only Enea SA is traded on the Warsaw Stock Exchange. Its shares have jumped 39 percent since its IPO in November.
RWE AG, which was picked for exclusive talks to take over Enea, won’t place a final bid, Polish Deputy Treasury Minister Jan Bury said in a phone interview today. The German utility probably wasn’t prepared to offer a premium for taking control of the company, Bury said. Poland will restart the sale by early December.
Enea shares advanced 0.2 percent to 21.4 zloty in Warsaw today, while the WIG20 Index jumped 3.4 percent to 2,302.54.
ING PTE, a Polish unit of ING Groep NV, the largest Dutch financial-services company, holds 27 percent of its assets in stocks, according to data on the financial-market regulator’s Web site.
To contact the reporter on this story: Pawel Kozlowski in Warsawpkozlowski@bloomberg.net
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