BUDAPEST/WARSAW: Poland led a decline in Central European stocks on Monday after the government announced a sweeping pension reform including the assets managed by private pension funds.
The plan triggered worries that demand for equities from the state-guaranteed funds – known as OFE in Poland – and key players in the bourse could be hit, similar to the impact of an overhaul three years ago.
The bourse’s bluechip index fell 1.2 percent by 1308 GMT, halving their early loss but still well underperforming indexes in the region and in Europe, with PKO BP bank shedding 2.6 percent.
Deputy Prime Minister Mateusz Morawiecki said the plan, expected to be launched in 2018, will oblige companies to create pension schemes for their employees and pension assets held by OFE funds would be transferred to voluntary personal savings accounts and the state demographic reserve fund.
Polish stocks rebounded from early lows as the details of the plan eased worries that the OFE funds will be forced to liquidate their assets by selling stocks.
“This issue should stop weighing on the (stock) market, because uncertainty had been the worst thing,” said Marcin Mrowiec, chief economist at the Warsaw-based Bank Pekao.
“Now we know that the new solution will not be a nationalisation, nor a sale of stocks managed by the OFEs, but will consist of transferring them to another organisation,” he added.
The zloty, trading at 4.432 against the euro, was still weakened, shedding half a percent from Friday, while the forint firmed slightly.
The zloty has weakened by almost 4 percent this year, well underperforming the Hungary’s forint. Hungary was downgraded into junk by rating agencies five years ago due to unorthodox measures including a nationalisation of pension funds, but has adopted more business-friendly policies since then.
Standard and Poor’s downgraded in January Poland’s credit rating to BBB+, outlook negative, arguing that the government weakened key institutions.
The agency held its rating on Friday despite additional risks posed to economic growth by Britain’s vote to quit the European Union.
Plans to convert Swiss franc mortgages into zloty at the cost of banks remain a threat to Polish assets, and the pension reform creates a new risk, traders said.
Elsewhere in the region, Slovenia postponed its roadshow for the sale of its largest bank, Nova Ljubljanska Banka (NLB), due to increased market volatility caused by Britain’s vote.
Copyright Reuters, 2016
Courtesy : BRecorder