By far the largest beneficiary of EU’s funds, PiS’ management of state run corporates have investors running for cover.
With Poland’s ruling party making a flurry of changes in the leadership of state-controlled enterprises, the country’s stock exchange, that beat all emerging markets in 2017, is on a downward spiral.
Among the growing uncertainties in investors’ appetite is the replacement of CEOs of 9 state-controlled companies this year. Since December twenty senior managers have also been shifted midst signs of infighting within the ruling Law and Justice (PiS) party.
Adding to this load of uncertainty is the absence of PiS leader Jaroslaw Kaczynski from public life due to health issues. Incidentally, Kaczynski is the author of interventionist policies criticized by the European Union and is Poland’s political arbiter.
These drastic changes were made under Prime Minister Mateusz Morawiecki who was appointed by PiS in December 2017 to smoothen ruffled ties with Brussels over the party’s judicial reforms agenda.
Although earlier, Morawiecki’s background of having run a bank owned by a foreign firm made some investors opine that he would be sympathetic to their position, at least more than his peers, now however they are not so sure.
“Investors do not know what the strategy is,” said Marcin Szortyka, head of equities at NN Investment Partners TFI, a top five investment funds in Poland. Szortyka’s assessment is based on rising uncertainty over the future of fuel companies, potential mergers in the banking sector and the uncertainty surrounding the building of a nuclear power plant.
With Poland being the biggest beneficiary of EU funds, Brussels has threatened to cut off funding in its next budget unless Morawiecki ensures judicial independence. Further clouding Poland’s outlook is a EU plan of diverting funds to southern European states so as to tackle a refugee crisis.
Midst this climate of uncertainty, changes in Poland’s state-run corporates are a step too far, feel investors.
“The market is already complicated enough without that,” said Tim Love, investment director of emerging market equities at GAM, a global asset management company.