Polish stocks slumped and government bond yields rose to their highest levels in almost a year as the government unveiled changes to its pension system that stopped just short of full nationalization of private pension funds.
In view of the proposed changes, which Prime Minister Donald Tusk presented on Wednesday last week, the government will redeem all the treasury bonds held by the private pension funds (OFEs), which account for 51.5 percent of their assets. Their value will instead be recorded within each insured person’s individual account in the state social security system.
The government’s OFE proposal will also allow people who until now have been members of private pension funds to decide if they want their pension savings to remain in OFEs. If they don’t submit a written declaration to that effect, their assets will be automatically transferred to the state-run social security system. The proposal now has to be adopted by the parliament and signed by the president.
On the day of the announcement, the WSE saw a huge sell-off, during which the blue-chip WIG20 index lost 2.5 percent. The blow was even greater on Thursday, as the effects of the government’s OFE plan announcement continued to resonate. Investors ignored the fact that other markets were showing growth, including Germany’s DAX and France’s CAC40. At the end of the day, the WIG20 lost 4.6 percent, the medium-cap mWIG40 index lost 4.3 percent and the small-cap sWIG80 index lost 3.6 percent.
Too soon for optimism
These drops were accompanied by high trade volumes. On Thursday trade exceeded zł.2 billion, more than twice as high as normal. After a slight increase on Friday, the WIG20 closed 5.4 percent below its Tuesday close.
Analysts were cautious to read too much into Friday’s rebound. “It is still hard to talk about optimism and think of any serious recovery from the losses,” Roman Przasnyski from Open Finance wrote in a statement.
“After two days of strong, sometimes even panicky selling, a rebound is a natural thing. … The increase we saw [on Friday] is merely a corrective movement and is by no means an indication of a turn for the better on WSE,” Marcin Kiepas from Admiral Markets wrote in an e-mailed comment.
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