Analysis-Polish markets at crossroads on rocky road to election
© Reuters. FILE PHOTO: Shadow of the supporter is pictured during the election convention of Law and Justice party, before Sunday's parliamentary elections, in Przysucha, Poland October 9, 2023. REUTERS/Kacper Pempel/File Photo
That might lead to fragile coalitions or potentially even a political vacuum, which could augur more pain for the zloty, a domestic bond sell-off and pressure on Polish stocks, which have all had a mixed year so far. Both PiS and its mainstream rivals are promising even more generous spending, possibly creating more inflationary pressures against a backdrop of a rate cutting central bank.The dominant concern among investors is the outlook for relations with the EU after PiS spent most of its eight years in power at loggerheads with Brussels over rule of law issues.
Investors widely expect that if the opposition liberal Civic Coalition grouping were to win, a rapprochement with the bloc could see some of the funding unlocked. Such a scenario would be a key positive for both the currency and Polish equities, said Anna Zadornova, an economist at UBS. The percentage of emerging market fund managers looking to put their money to work on Poland's bourse has risen to more than 50% by end-August, from just over 40% in April 2021, Copley Fund Research calculations show.Meanwhile the zloty could strengthen to 4.2 to the euro under an opposition-led government, a level last seen more than five years ago, while under a PiS administration, the zloty could weaken to 4.85 by year-end, Zadornova at UBS said.
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