fWIG20 Index very interesting moment at the chart

hello traders,

Before you start read this entry, please visit my earlier post regarding currently situation in Poland. This will allow you to better understand the current situation:

link 1

link 2

The changes in the system of of open pension funds in 2014 will have a big impact on the Stock Exchange in Warsaw. Significant confusion bring abrupt changes and their 3-phase character. First, the shortest phase is January. As of the end of January of open pension funds will have to give 51.5% of their assets to the Social Insurance Institution. At the end of November last year, open pension funds (OPF) were forced to sell shares to get the money needed to meet this condition. So in December we witnessed the correction. Still, this means limited potential for growth in January and could still mean supply.

It depends on the behavior of stock markets in January and the level of cash that pension funds will want to keep in their portfolios. According to estimates most likely supply a 0.5-1.5 bilion PLN shares, but may be derived partly from a more liquid foreign shares, which in turn can absorb the shock potential. Now, theoretically, the share of stocks in the portfolios of pension funds after the transfer of 51.5% increase to about 90%. This is a high level, above the minimum (75% for the first year) and does not leave much space for further purchases of shares.

It is difficult to expect such purchases as in 2013 when their balance amounted to a record of more than 17 billion PLN.

The second phase will run from February to the end of July, when the OPF will receive strong inflows of the order of 0.9 billion PLN per month, and still not be encumbered with any outflows. In addition, from April will continue choosing between pension funds and Social Security, so the pension funds will be motivated to achieve good results. In addition, begin to change management policies and portfolios, and at least the first steps in this direction.

There will be no internal benchmark and system of penalties for deviation from the average rate of return for all pension funds. Also, limit investment in foreign shares will increase considerably (up to 10% in 2014 and to 30% by the end of 2016). It is not known how far and how fast OFE decide to make changes to their portfolios.

The third phase will begin in August. Then it will already know how many people took the decision to remain in the pension funds, and besides inflows, there will be outflows that result from the introduction of "slider". Net flow depends on the size of contributions that will continue to flow, but estimates suggest that about 25% if the current remains in the OPF is roughly balances the inflows with outflows.

In the chart, the situation is as follows. On today's market reached levels where you could potentially talk about the end of correction. However, it is possible that the market may test the 2,475 points level yet. As shown on the chart below. Medium-term trend, however, should be maintained, and within the next few days we should see lower levels than today.

chart 1. fWIG20 Index H1, 2014-01-22

trade safe,
oscarjp

The information contained in this publication is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Any opinion offered herein reflects oscarjp-chrimatistikos current judgment and may change without notice. Users acknowledge and agree to the fact that, by its very nature, any investment in shares, stock options and similar and assimilated products is characterised by a certain degree of uncertainty and that, consequently, any investment of this nature involves risks for which the user is solely responsible and liable.