Investors gave a resounding approval to Poland’s election results as the nation’s stocks rallied with currencies after a bloc of pro-European opposition parties appeared on track to unseat the nationalist government.
(Bloomberg) — Investors gave a resounding approval to Poland’s election results as the nation’s stocks rallied with currencies after a bloc of pro-European opposition parties appeared on track to unseat the nationalist government.
The benchmark WIG20 Index jumped as much as 4.9%, the most since May 2022, before trading 3.6% higher. The zloty appreciated by as much as 1.8% in early European trading and traded at the strongest level since early September.
An exit poll showed the three-party opposition alliance winning 248 seats in the 460-member lower house of parliament. The outcome, if confirmed by official results due by Tuesday, is seen as beneficial for Polish financial assets as a new administration may move to quickly unfreeze access to tens of billions of euros in European Union funds held up over the current government’s rule-of-law infringements.
“This was our best case scenario,” Anders Faergemann, a senior money manager at Pinebridge Investments in London. “If the exit poll is accurate, we would expect financial markets in Poland to react positively.”
Still, the handover of power is likely to take time. Prime Minister Mateusz Morawiecki said on Sunday night that the Law & Justice party — which is still the biggest party in parliament — is ready to discuss coalition talks with “everyone.”
Aides for President Andrzej Duda said that Polish political custom is for the head of state to nominate someone from the largest party in parliament as prime minister. The opposition said this would waste time by stalling the creation of a majority cabinet by the current opposition bloc, and may create a power vacuum at a dangerous moment with a war raging in neighboring Ukraine. Law & Justice has no path toward a majority if the exit poll is confirmed, according to the opposition.
“Investors see that the status quo in Poland has changed, which should bode well for the zloty and stocks,” said Radoslaw Cholewinski, a board member at mutual fund Skarbiec TFI in Warsaw. “This picture could change, however, if Law & Justice doesn’t concede.”
The zloty has been Europe’s best performing emerging-market currency against the euro over the past month, while Warsaw listed stocks also outperformed peers. The turnaround was partly fueled by bets that the pro-EU opposition — which combines center-right, centrist and leftist parties — could jointly win a majority.
“This should provide a positive knee-jerk to Polish markets, but the situation is going to be volatile,” said Viktor Szabo, an investment director at Abrdn in London. “It looks like the opposition has sufficient support to form a coalition, which should be positive over the medium term. However, it won’t be an easy coalition.”
–With assistance from Konrad Krasuski, Agnieszka Barteczko and Barbara Sladkowska.
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