Global markets are holding their breath, but the zloty is gaining

Global markets are holding their breath, but the zloty is gaining. This is a reaction to the poll results of the parliamentary elections in Poland. Investors are counting on warmer relations with Brussels and a quick KPO.

The poll results indicate a change in power

Poll results of the parliamentary elections in Poland based on both exit polls and late polls they suggest a change of power. The declared coalition of KO, Third Way and the Left will have a parliamentary majority. It is worth remembering that the economic program of this coalition remains to a large extent a question mark, as the preferences of the coalition partners (especially the smaller ones) may differ significantly in many areas. Meanwhile, in terms of economic policy, quite important choices will have to be made.

In recent times, the emphasis has clearly been on stimulating short-term economic growth at the price of increasing the budget deficit and the risk of inflation remaining permanently above the target. If the new authorities want to change this, they will face a potentially difficult period, as the economy will have to slow down in the face of an almost certain recession in Western Europe.

Will the KPO funds finally arrive?

In the short term, however, the market responds to warming relations with Brussels, better perception of foreign capital and hopes for an inflow of funds from the KPO. As a result, the zloty is gaining over 1% at Monday's opening, and the futures are gaining Wig20 they record increases of over 3%. In this case, investors will also count on significant changes regarding State Treasury companies.

Looking through the prism of valuations, the Warsaw index offers a significant discount and so far it has been justified by the unpredictability of the policy of the most important State Treasury companies (and the policy in relation to these companies). If this discount were to disappear now, WIG20 could have quite significant growth potential, of course assuming at least neutral global markets.

Waiting in suspense

Meanwhile, on global markets we are waiting in suspense. Friday brought obvious deterioration of mood due to Israel's upcoming operation in the Gaza Strip and related concerns about the escalation of the conflict (especially the involvement of Iran). Oil and gold prices rose sharply. So far, this escalation has not occurred, but there is no significant relief on the market. The very fact that there are two American aircraft carriers near Israel captures the imagination of investors. Prices are increasing at the moment oil This is mainly the result of concerns, as the flow of raw materials has not been noticeably disrupted, but it is the possible greater increase in oil prices that seems to be the number one risk for the global economy from the macroeconomic perspective.

At 9:00 a.m. the euro costs PLN 4,48, the dollar PLN 4,25, the franc PLN 4,71 and the pound PLN 5,18.

Source: Dr. Przemysław Kwiecień CFA, XTB